Trai rejects floor price, says govt should provide relief to telcos

By: |
August 02, 2021 3:15 AM

Regulator feels CCI would see floor tariffs as cartelisation

The move in the short run – if 5G auctions are held next year in March – would help Bharti Airtel and Reliance Jio in lowering their SUC payment. However, a similar gain may not come through Vodafone Idea's way.The move in the short run – if 5G auctions are held next year in March – would help Bharti Airtel and Reliance Jio in lowering their SUC payment. However, a similar gain may not come through Vodafone Idea's way.

Rejecting the demand by the telecom operators, especially Vodafone Idea, for fixing a floor price for voice and data tariffs, the Telecom Regulatory Authority of India (Trai) has lobbed the ball into the government’s court leaving it with the responsibility of providing relief to the sector .

This is the second time the regulator has signalled it is not going to take forward any proposal regarding a floor price. The view which has emerged within Trai is that fixing a floor price would be objected to by the Competition Commission of India (CCI) as it would amount to the regulator being part of an industry cartel. Officials said Trai wants to avoid any kind of turf battle between two regulators.

The regulator is apparently of the view the government and industry should work together to put the sector back on track. For instance, the operators should take the first step by hiking tariffs and the government should follow up with measures like reducing the licence fee, spectrum usage charge, extension of the moratorium period for payment of deferred spectrum installments, etc. Something of this sort did happen in 2019 after the Supreme Court order in October that year on the adjusted gross revenue dues, which dealt some operators a death blow.

The government provided a moratorium on deferred spectrum installments for two years – FY21 and FY22 – , moved the Supreme Court praying that the operators be allowed to pay their AGR dues in installments spread over 20 years (the court finally accepted a 10-year period), and operators on their part raised tariffs in December 2019.

This burden-sharing somehow lost steam down the years with the operators not raising tariffs further and the government not taking up other relief measures relating to the reduction of licence fee and spectrum usage charge.

With operators like Bharti Airtel and Vodafone Idea raising tariffs for the their post-paid users recently – Bharti has also raised for its entry-level pre-paid users – , the stage is once again set for the government to fulfil its end of the commitment, Trai feels.

The Trai has already in the past given recommendations on reducing the licence fee from 8% of the AGR of the operators to 6% by reducing the 5% universal service obligation levy by two percentage points. It has also given a recommendation for rationalising the calculation of AGR by providing what revenues of the operators should be taken into account and what should be left out from the computation of the levy. Since these are policy decisions, the final call has to be taken by the government.

Just the reduction in the licence fee by two percentage points would provide a relief of around Rs 3,000 crore annually to the operators.

Vodafone Idea, which continues to be in trouble and is not able to raise funds to meet its statutory payments to the government, had recently dialled both the regulator and the government. From the regulator it sought a floor price for tariffs and from the government a further one-year extension of moratorium on payment of deferred spectrum installments.

While the Trai has expressed its inability to bring about the floor price, the department of telecommunications (DoT) is considering a relief package for the operators which may include rationalisation of AGR levy, reduction in licence fee and SUC and extension in the moratorium period. The DoT needs the concurrence of the finance ministry before moving ahead since all these aspects have revenue implications for the government.

Apart from ensuring that the telecom market continues to be a three-player market, it’s in the government’s interest to see that Vodafone Idea survives because a lot of its money is blocked in the company. For illustration, Vodafone Idea’s net debt stands at Rs 1.8 lakh crore, of which the government dues in the form of deferred spectrum payment (Rs 96,300 crore) and AGR dues (Rs 61,000 crore) is around Rs 1.57 lakh crore.

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