telecom news: Telecom companies may see licence fee cut

MUMBAI: The authorities could shortly cut back licence charges of telecom corporations from 8% to both 5% or 6%, in what could be a second main step to revive an trade combating excessive debt amid intense competitors which has dragged income and profitability.

According to 2 senior authorities officers, a gathering on the highest ranges of the federal government is scheduled for this week to debate cutting down the licence charges which, trade specialists say, will save the three telcos a mixed Rs 4,000-5,000 crore yearly.

Industry specialists stated that whereas a licence charge minimize will give some aid, it gained’t be sufficient to stave off the stability sheet risks of the likes of Vodafone Idea and Bharti Airtel.

These two telcos face statutory dues of over Rs 53,000 crore and Rs 35,500 crore, respectively, on account of a Supreme Court order widening the definition of adjusted gross income (AGR).

“The government cannot do anything about the AGR dues, which has been decided by the Supreme Court. From the initial suggestions of relief measures, a licence fee cut will be taken up now following the two-year spectrum moratorium already announced,” stated a senior official, who didn’t need to be named.

Another particular person conscious of the developments stated that when a choice is taken, will probably be despatched to the Cabinet to be ratified.

The Committee of Secretaries (CoS), which was set as much as counsel measures to enhance the well being of the sector, had final month really useful a discount within the licence charge paid by telecom corporations and permitting a two-year moratorium on spectrum funds. While the moratorium was authorised by the Cabinet, giving a Rs42,000 crore money circulation aid to the three personal telcos, the licence charge discount subject is being taken up now.

Telcos yearly pay 8% of their adjusted gross income (AGR) as licence charges. The trade has been lengthy calling for a discount in that charge, in addition to additionally within the spectrum utilization cost (SUC), which is paid at 3-5% of AGR.


“So, the Universal Service Obligation Fund (USOF) component of licence fee could be cut to 3% or 4%, from 5%, and the pure licence fee component to 2% from 3%,” stated one of many officers. USOF contains 5% of the 8% of AGR that telcos pay as licence charges yearly.

Analysts stated if this licence charge will get decreased to five%, Bharti Airtel will save round Rs 2,000 crore, Jio some Rs1,500 crore and Vodafone Idea round Rs 800 crore within the subsequent fiscal yr beginning April 2020.

“If this (licence fee cut) happens, then this would be a step in the right direction since Indian licence holders are on the higher side of regulatory charges. However, it will not be enough to address the near-term balance sheet concerns pertaining to the AGR issue,” stated Rajiv Sharma, head of analysis at SBICap Securities.

The authorities has stated it gained’t be capable to give any aid to telcos on the AGR dues until the court docket directs it to. Airtel and Vodafone Idea have each filed restricted evaluate petitions, however they haven’t been heard as but.

Prashant Singhal, world expertise, media and telecommunications (rising markets) chief at EY, stated that AGR is a a lot greater concern and trade is “hopeful that the top court looks into the review petition.”

But any minimize in levies — coupled with the two-year moratorium on spectrum funds, current worth hikes by the telcos and any transfer by the regulator to set a ground for tariffs — will add to the outlook in direction of the sector turning optimistic, say analysts.

And this can assist appeal to traders for telcos reminiscent of Bharti Airtel, who has introduced a $Three billion fundraising programme through fairness and debt. Vodafone Idea within the close to future too might want to elevate funds, not only for AGR but additionally for capex to tackle Airtel and Jio out there.

The sector has been lengthy calling for levies such because the licence charges and SUC to be minimize, saying the Indian telecom trade is among the many highest taxed on the earth, with Rs30 of each Rs100 earned going to the federal government.

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