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Reform package being considered for sectoral relief: Secy

After the price war shrunk the industry into three non-state players from eight, with two going out of business, the DoT is considering a reform package to the telecom sector to help its revival, which may include longer spectrum payment periods.

, ET Bureau|
Updated: Oct 16, 2019, 03.53 PM IST
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telecom spectrum
NEW DELHI: The department of telecommunications (DoT) is considering providing a reform package to the beleaguered telecom sector, that may include longer spectrum payment periods and lower rates of interest, which can help in the industry’s revival, said telecom secretary Anshu Prakash.

He added that the department had held meetings with Cellular Operators Association of India (COAI), infrastructure providers and individual companies over the past two months, to understand the issues being faced by them, and ‘what can be done more to enable them to actualize their potential.’

The secretary added that the DoT was considering industry’s requests, and would take a decision keeping in mind the realities around the financial health of the sector.

“We're looking at all aspects reforms could be in the form of number of installments, the rate of interest and spectrum caps. What we have received from Trai is pricing, there are other parameters which we have to examine, ultimately it has to go for government approval,” Prakash said, Wednesday.

“Whatever is decided will be done keeping in mind the realities and what is the situation in terms of number of players, competition, requirement of expansion of network and revenue consideration,” he added.

The COAI, he said, has asked for a moratorium for two years on spectrum payments and more installments, which the department was examining.

The telecom secretary’s statement follows one from telecom and IT minister Ravi Shankar Prasad who said Monday raised the possibility of relief for the sector, referring to plans that included ‘ ‘reforms on spectrum pricing.’

“By reform what I would understand is having a package with some parameters which make it good for the telecom industry to achieve its objectives. The specific requests of industry are concerned, we have received the requests, we're processing the various asks, and after due examination we will take a call,” Prakash added.

When asked specifically on the possibility of reducing spectrum usage charge (SUC) for the upcoming auctions, from present levels of 3% that is asked by the industry, the secretary said, “The rate has already has come to 3% As you are aware, and we are taking a weighted average because different spectrum was given at different points in time. Now for this current auction, what will be the SUC is a decision which remains to be taken.” .

Loss-making Bharti Airtel and Vodafone Idea have been urging the government to provide financial relief, including some way of increasing tariffs, apart from the lowering of spectrum prices, licence fees and spectrum usage charges along with the release of Rs 36,000 crore input tax credit.

Jio, the only profitable telco in India, joined its peers in seeking relief for the sector at the India Mobile Congress on Tuesday.

“I absolutely believe that the sector needs some reform because I think the sector is taxed anywhere between 30% to 32%, which is very high,” said Mathew Oommen, president (networks), at Jio. “GST (goods and services tax) is at 18%, AGR (adjusted gross revenue) is 8%, 5% is USO (Universal Service Obligation) Fund, which is Rs 50,000 crore. Should we not defer any more USO taxation, till capital-efficient use of that Rs 50,000 crore is done?” He added that 5G spectrum needed to be priced correctly. Vodafone Idea has been worst hit by the price battle, leading to quarterly losses of around Rs 5,000 crore.

The government had increased the tenure of installments to be paid for spectrum bought in auctions to 16 years from 10 years in 2017. It had also lowered the rate of interest on delayed payment penalties.

In order to give more relief to the sector, Prasad has written to the finance minister, seeking relief measures, pointing out that AGR had shrunk to Rs 1.39 lakh crore in FY19 from Rs 1.85 lakh crore in FY17, reflecting the sector’s poor health. Meanwhile, The Prime Minister’s Office (PMO) is said to be closely involved in assessing the state of the telecom industry and is holding consultations on ways of restoring its viability.

The price war has shrunk the industry into three non-state players from eight, with some exiting the country, some merging and two — Aircel and Reliance Communications — going out of business. Experts said India’s telecom sector can ill-afford a third operator exiting the market or going bankrupt as this will hurt all stakeholders, including consumers, equipment vendors and tower companies, besides leading to more job losses.

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