The government has decided to exempt companies offering fixed-line telephone services from the license fee, which is paid on the adjusted gross revenue (AGR), minister of Telecommunication & IT A Raja said on Friday. The decision is expected to cost the exchequer over Rs 2,000 crore.
?I have already asked the telecom commission to deliberate on the issue to exempt fixed-line telephony from the licence fee,? Raja said. Telecom companies operating in circle A and metros pay 10% of AGR as their licence fee, while those in circles B and C pay 8% and 6%, respectively.
The biggest beneficiary would be state-run BSNL, 90% of whose revenue accrues from fixed-line services on a subscriber base of around 31 million. According to estimates, BSNL?s saving is expected to be to the tune of Rs 1,200 crore. Sister PSU MTNL has a subscriber base of around 4.5 million.
Private players Bharti Airtel Ltd, Reliance Communications Ltd and Tata Teleservices Ltd have a subscriber base of around 3.5 million. The three private telecom operators annually pay roughly Rs 700 crore in licence fees.
The government?s move comes at a time when the country has emerged the second largest in terms of mobile subscribers, but fixed-line telephony?s performance in terms of both urban and rural subscriber additions has been dismal, said an industry expert.
Explaining the government?s rationale, Raja said fixed-line density was skewed–despite a teledensity of 25%, over 70% of rural India still didn?t have connections, and he hoped that his decision would encourage private telecom operators to go to the hinterland.
Commenting on the decision, Bharti Airtel chairman & managing director Sunil Bharti Mittal said, ?I am delighted. Fixed-line telephony must become a recipient of funds and operators should not be burdened with a host of levies like a licence fee or contribution to the Universal Service Obligation Fund.?
Added a Mumbai-based analyst: ?As far as competition is concerned, there is no attractive features in fixed-line telephony. There is immense potential in the wireless sector and more competition is expected in the segment. On the other hand, the investment is high in fixed-line telephony and income will be low as there is no potential growth.?