Telecom companies fear government relief may come too late
, ET Bureau|
Feb 23, 2018, 06.34 AM IST
KOLKATA: Telecom companies fear a Cabinet decision after March on relief measures for the telecom industry will be way too late as financial stress levels of the sector, which is saddled with Rs 7 lakh-crore debt and is in the throes of brutal price wars, are rising by the day.
The companies were pinning their hopes on an early decision, especially since the February 1 Budget totally ignored the industry’s call for a reduction in high telecom levies such as licence fees, spectrum usage charge (SUC), Universal Service Obligation Fund (USOF) and a re-definition of a telco’s adjusted gross revenue (AGR), the revenue stemming from licensed telecom services.
Hefty telecom levies have been amajor turn off for India’s phone companies as nearly 33% of every Rs 100 earned is paid to the government as taxes. A cut in these levies is considered critical to provide immediate relief to financially stressed telcos, which have seen a sharp erosion in revenues and profits amid continuing price wars following Reliance Jio Infocomm’s entry in September 2016.
“The telecom industry was deeply disappointed when the Budget disregarded its proposals and an early Cabinet decision paving the way for some financial relief would have been helpful to arrest the steep revenue decline, and any further delay beyond March will only exacerbate the sector’s financial struggles,” Rajan Mathews, director general of Cellular Operators Association of India (COAI), told ET.
The COAI is the apex industry body representing telco biggies Bharti Airtel, Vodafone India, Idea Cellular and Jio Infocomm, among others.
The Cabinet is reportedly expected to take a call on extending relief to the telecom industry based on the suggestions of an inter-ministerial group (IMG) only in March. The IMG has primarily suggested extension of telco payments tenure for auctioned airwaves from 12 years to 16 and a cut in interest rates on penalties by about 2%.
The industry, however, believes early reduction in telecom levies is the “only way forward to alleviate financial stress,” especially since the IMG’s suggested remedies are likely to have limited impact and not really lead to tangible benefits for the sector barring a temporary easing of cash flows in the initial years.
Mathews said something can be salvaged if the much awaited “Cabinet decision suitably incentivises the industry by reducing overall telecom levies, and is built around the goals of the National Telecom Policy 2018, which is likely to treat the industry not merely as a revenue generator for the government but as a source of economic growth and development”.
In its recent suggestions to the telecom department (DoT) for the NTP 2018 being formulated by the government, the Telecom Regulatory Authority of India (Trai) has also backed a review of licence fees, SUC and USOF levy to enhance overall ease of doing business. It has also backed a review of the definition of AGR to remove ambiguities in licence fee structure.
Telcos, at present, pay roughly 8% of annual AGR as licence fee and another 3% of AGR as SUC, which are two key avenues of government earnings from the industry.
The government has recently said that through NTP 2018, it would signal that revenue is a secondary concern, and that the primary aim would be attracting big-ticket investments into the sector and ensuring access and telecom services to one billion people.
The companies were pinning their hopes on an early decision, especially since the February 1 Budget totally ignored the industry’s call for a reduction in high telecom levies such as licence fees, spectrum usage charge (SUC), Universal Service Obligation Fund (USOF) and a re-definition of a telco’s adjusted gross revenue (AGR), the revenue stemming from licensed telecom services.
Hefty telecom levies have been amajor turn off for India’s phone companies as nearly 33% of every Rs 100 earned is paid to the government as taxes. A cut in these levies is considered critical to provide immediate relief to financially stressed telcos, which have seen a sharp erosion in revenues and profits amid continuing price wars following Reliance Jio Infocomm’s entry in September 2016.
“The telecom industry was deeply disappointed when the Budget disregarded its proposals and an early Cabinet decision paving the way for some financial relief would have been helpful to arrest the steep revenue decline, and any further delay beyond March will only exacerbate the sector’s financial struggles,” Rajan Mathews, director general of Cellular Operators Association of India (COAI), told ET.
The COAI is the apex industry body representing telco biggies Bharti Airtel, Vodafone India, Idea Cellular and Jio Infocomm, among others.
The Cabinet is reportedly expected to take a call on extending relief to the telecom industry based on the suggestions of an inter-ministerial group (IMG) only in March. The IMG has primarily suggested extension of telco payments tenure for auctioned airwaves from 12 years to 16 and a cut in interest rates on penalties by about 2%.
The industry, however, believes early reduction in telecom levies is the “only way forward to alleviate financial stress,” especially since the IMG’s suggested remedies are likely to have limited impact and not really lead to tangible benefits for the sector barring a temporary easing of cash flows in the initial years.
Mathews said something can be salvaged if the much awaited “Cabinet decision suitably incentivises the industry by reducing overall telecom levies, and is built around the goals of the National Telecom Policy 2018, which is likely to treat the industry not merely as a revenue generator for the government but as a source of economic growth and development”.
In its recent suggestions to the telecom department (DoT) for the NTP 2018 being formulated by the government, the Telecom Regulatory Authority of India (Trai) has also backed a review of licence fees, SUC and USOF levy to enhance overall ease of doing business. It has also backed a review of the definition of AGR to remove ambiguities in licence fee structure.
Telcos, at present, pay roughly 8% of annual AGR as licence fee and another 3% of AGR as SUC, which are two key avenues of government earnings from the industry.
The government has recently said that through NTP 2018, it would signal that revenue is a secondary concern, and that the primary aim would be attracting big-ticket investments into the sector and ensuring access and telecom services to one billion people.
