The government could give support to the crisis-ridden telecom sector at three levels to bring relief for the network operators that are struggling to pay their dues amid rising losses, according to Deutsche Bank.

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Budget 2020 was seen as the event that would bring in major relief measures for the telecom companies but the Finance Minister remained more focused on balancing and containing the fiscal deficit.

However, Deutsche Bank, in its latest report, has stated three levels of support that the government can provide to the struggling telcos. The first potential relief has already been initiated by the government — a two-year deferral on spectrum payments. The second is that the Department of Telecom (DoT) could reduce AGR claim — especially on interest, and the third is cutting access fees and set a floor price.

“We expect the DoT to accept a haircut. Waiving much of the interest and penalties, which makes up 75 percent of the ruling, is our expectation. We factor in a 40 percent cut in dues, dropping Vodafone Idea’s (VIL) payment to Rs 312 billion and Bharti Airtel's to Rs 213 billion," the report said.

However, the foreign brokerage said that the AGR relief is a short-term solution and that will not fix the solvency of Vodafone Idea.

In terms of helping with the profits, the brokerage believes there are three possible solutions. The first is to lift mobile prices. The second is to mandate minimum pricing so that Reliance Jio cannot easily bankrupt another telco. This is a needed step as it will encourage investment. The third is to reduce charges so that Vodafone Idea doesn’t suffer a lot.

Reworking 900 MHz fees would be the most obvious way to help Vodafone Idea in particular, added the report.

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