1. Reliance Jio, Bharti Airtel, Vodafone, others wish for cut of licence fee set to be snubbed; here is why

Reliance Jio, Bharti Airtel, Vodafone, others wish for cut of licence fee set to be snubbed; here is why

Telecom operators looking for a cut in licence fee and spectrum usage charge (SUC) are going to be disappointed as the government-appointed inter-ministerial group (IMG) is unlikely to recommend this.

Published: June 29, 2017 7:20 AM
Reliance Jio, Bharti Airtel, Vodafone, cut of licence fee set, licence fee set, telecom firms, telecom firms in india, indian telecom firms, IMG, spectrum usage charge, Telecom Regulatory Authority of India That’s because representatives of the finance ministry on the panel are strongly opposed to any such move as it would lead to decline in government’s revenue. (Image: Reuters)

Rishi Ranjan Kala

Telecom operators looking for a cut in licence fee and spectrum usage charge (SUC) are going to be disappointed as the government-appointed inter-ministerial group (IMG) is unlikely to recommend this. That’s because representatives of the finance ministry on the panel are strongly opposed to any such move as it would lead to decline in government’s revenue. Reducing licence fee and SUC were the only matter on which the entire industry — legacy players like Bharti Airtel, Vodafone and Idea Cellular as well as new entrant Reliance Jio — had presented a united picture before the IMG. For incumbents there’s going to be another disappointment as the panel is not going to make any recommendations on interconnect usage charge as well as floor price for tariffs since these are exclusive domains of the Telecom Regulatory Authority of India.

However, the incumbents may get some relief as the IMG is inclined to consider their demand for increasing the moratorium period as well as instalments for deferred payment for spectrum acquisition. However, sources aware of the deliberations in the IMG said that by what period these would be increased is still to be decided. Officials in the department of telecommunications (DoT) said the IMG is likely to finalise its report by July 15-20, after which it will be placed before the Telecom Commission. Operators like Bharti had sought an increase in the moratorium to five years from the current two and instalments to 15 years from the current 10. Idea had urged that the installments be increased to 20 years to make it co-terminus with the validity of licence period.

On licence fee the entire industry had urged that it be reduced to around 1% of their adjusted gross revenue against 8% currently. On SUC, they had urged it be brought down to 1% of adjusted gross revenue (AGR) for all auctions bought in future auctions against 3% at present. The industry’s logic was that the present rates were fine till the time spectrum was being given on subscriber-linked criteria but now that spectrum is auctioned, the government should only charge for administrative costs which should not be more than 1% of their AGR.

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On deferred payment, Jio’s was the lone voice which wanted that this mechanism should be done away with as it led to irrational bidding by the operators. Jio had also differed with the incumbents on IUC charge being increased to reflect full cost and introducing any floor price for tariffs.

The telecom industry’s total debt stands at around Rs 4.60 lakh crore. It has bought spectrum since 2010 worth Rs 3.45 lakh crore for which an upfront payment of Rs 1.90 lakh crore has been made and the balance Rs 3.08 lakh crore needs to be paid up to 2028-29. If the deferred payment period is increased, this would get extended.

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