Telecom firms seek relief from high taxes, spectrum costs

28 September 2017

Established telecom operators including Bharti Airtel and Idea Cellular on Wednesday lamented the high taxes and spectrum costs being faced by the industry, and asked the government for immediate relief.

While most of the speakers at the inaugural India Mobile Congress in New Delhi alluded to India's digital vision and technological prowess, Idea Cellular managing director and chief executive Himanshu Kapania minced no words in highlighting the "severe financial and mental stress" that the industry is going through.

"While it is important to talk about vision 2020, it is also important to talk about the big elephant in the room that no one is talking about," Kapania said. He underlined the industry's woes ranging from proliferation of bundled unlimited usage plans to "lack of effective regulatory intervention", all of which had bearing on the industry's realisations.

"The recent market developments have drastically altered the dynamics of the industry, resulting in sector passing through a severe financial and mental stress," he said, without mentioning the disruptive entry of Reliance Jio Infocom in the field.

Bharti Airtel MD and CEO for India and South Asia Gopal Vittal too rued the high taxes in the industry. "Taxation on industry is very high. It is in the range of 29-32 per cent. Spectrum cost is one of the highest and tariffs among the lowest. All of this needs to change to realise dream and vision of Digital India," Vittal said.

Kapania said that industry is facing survival issues given the free fall in voice and data tariffs. Voice tariffs have come down by half while data tariffs have fallen even more sharply, he noted.

"The (recently) announced interconnect usage charges (IUC) deplete the industry of funds, besides creating inter-operator imbalances on account of high traffic asymmetry," Kapania said, referring to the decision by the Telecom Regulatory Authority of India to cut IUC from Rs0.14 to Rs0.06. (See: Trai to cut interconnect charge to Rs0.06 from 1 October)

He warned that the fault lines are already becoming visible as the industry has logged two per cent de-growth in 2016-17. "The industry forecast for this year entails a decline of 10-12 per cent including the impact of 58 per cent reduction in IUC which will aggravate the financial stress in the sector," he said.

Such inhibiting factors would not only impact the competitive structure of the industry but also "adversely hit" the government's revenue collection from the sector, he said.

Kapania said while the Indian telecom market is gearing for a big transition to 4G services, there are millions of users who rely on 2G for connectivity and spend Rs80-100 a month on mobile telephony. "By enabling connectivity at as low as Rs10 per month, the tepid revenue growth prospects for the industry in the near term coupled with the alarming threat of higher NPAs will curtail the industry's ability to invest," he said.

Claiming that Trai's policies would ensure survival of only one technology while older technologies close down, he sought an immediate relief for the sector, from the government.

Terming spectrum as key raw material for telecom services, Kapania said that radio waves are the highest cost element for industry. "With India having the world's highest spectrum prices, deferment of spectrum payment and reduction of interest rates are immediate steps that need to be taken. Rationalisation of taxes, cut in GST rate and lowering of spectrum charges ... are much-needed respite that cannot wait any further," Kapania added.

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