DoT seeks industry view on licensing structure overhaul
, ET Bureau|
Updated: Oct 23, 2017, 11.23 PM IST
KOLKATA: India’s telecom department has sought the industry’s views on overhauling the licensing structure, which, if accepted, could turn out to be a radical reform under the new telecom policy.
Senior officials from the Department of Telecommunications (DoT) will engage with industry executives on Tuesday to review the relevance of licence fees and spectrum usage charges (SUC) when airwaves are auctioned and no longer allotted by the government, three people aware of the matter told ET. Telecom Secretary Aruna Sundararajan has indicated that the draft New Telecom Policy 2018 will be unveiled by December for comments from stakeholders and likely introduced by March 2018.
“Any potential licensing reform that rings in a sharp reduction or phases out licence fees and SUC would deliver a huge boost to the sector as it would reduce cash drainage in a debt-laden industry hit by high levies and expensive spectrum,” said Rajan Mathews, Director General of the Cellular Operators Association of India, a grouping representing top companies Bharti Airtel, Vodafone, Idea Cellular and Reliance Jio Infocomm and others. According to Mathews, revenue sharing becomes outmoded once telcos make upfront payments for spectrum bought in auctions at market-determined rates.
“If the government rationalises the present licensing model and does away with the double taxation scenario — of taking upfront payments for auctioned spectrum and a share of a telco’s revenue as licence fees and SUC — it would be a huge positive for the telecom industry,” said Nitin Soni, director at global ratings company Fitch.
Any “big-ticket licensing reform that reduces telco costs would positively alter the economics and competitive dynamics of the telecom industry,” said TV Ramachandran, president of the Broadband India Forum.
A top telco executive, who will participate in Tuesday’s meeting, expects a holistic review of “issues like the relevance of revenue share through the levying of licence fees and SUC as a percentage of a telco’s licensed revenues.”
Revenue-sharing is largely irrelevant because it was created when spectrum was bundled with telco licences, which is no longer the case after the government decided to auction airwaves and moved to a market-discovered pricing mechanism seven years ago.
At present, telcos pay 8 per cent of their adjusted gross revenue as licence fee and about 5 per cent as SUC. The telecom industry, which is weighed down by about Rs 5 lakh crore of debt, pays about 30 per cent of every Rs 100 earned to the government and for buying expensive spectrum.
Senior officials from the Department of Telecommunications (DoT) will engage with industry executives on Tuesday to review the relevance of licence fees and spectrum usage charges (SUC) when airwaves are auctioned and no longer allotted by the government, three people aware of the matter told ET. Telecom Secretary Aruna Sundararajan has indicated that the draft New Telecom Policy 2018 will be unveiled by December for comments from stakeholders and likely introduced by March 2018.
“Any potential licensing reform that rings in a sharp reduction or phases out licence fees and SUC would deliver a huge boost to the sector as it would reduce cash drainage in a debt-laden industry hit by high levies and expensive spectrum,” said Rajan Mathews, Director General of the Cellular Operators Association of India, a grouping representing top companies Bharti Airtel, Vodafone, Idea Cellular and Reliance Jio Infocomm and others. According to Mathews, revenue sharing becomes outmoded once telcos make upfront payments for spectrum bought in auctions at market-determined rates.
“If the government rationalises the present licensing model and does away with the double taxation scenario — of taking upfront payments for auctioned spectrum and a share of a telco’s revenue as licence fees and SUC — it would be a huge positive for the telecom industry,” said Nitin Soni, director at global ratings company Fitch.
Any “big-ticket licensing reform that reduces telco costs would positively alter the economics and competitive dynamics of the telecom industry,” said TV Ramachandran, president of the Broadband India Forum.
A top telco executive, who will participate in Tuesday’s meeting, expects a holistic review of “issues like the relevance of revenue share through the levying of licence fees and SUC as a percentage of a telco’s licensed revenues.”
Revenue-sharing is largely irrelevant because it was created when spectrum was bundled with telco licences, which is no longer the case after the government decided to auction airwaves and moved to a market-discovered pricing mechanism seven years ago.
At present, telcos pay 8 per cent of their adjusted gross revenue as licence fee and about 5 per cent as SUC. The telecom industry, which is weighed down by about Rs 5 lakh crore of debt, pays about 30 per cent of every Rs 100 earned to the government and for buying expensive spectrum.
