Telcos including Airtel have recently hiked tariffs, will that make the sector viable?
Tariffs have risen to some extent but the sector is still under stress. It is a rare situation where we have written to the Trai saying please regulate us, because the industry is killing itself.
Ho much more will the tariffs go up?
Tariffs on an average have to eventually reach Rs 300 per person month which means customers at low end pay about Rs 100 and at high end pay between Rs 450-500 , ie when they are consuming a lot. However, before that we should get to an ARPU of about Rs 200, a 70% jump from today’s Rs 128 so that at the lower end the Arpu is about 75. There are people who can easily afford Rs 500 but they are being forced to pay Rs 250, as telecom operators are fighting like cats and dogs in the market.
Will telcos soon go through another round of tariff hikes?
You cannot get to Rs 200 and then Rs 300 without the intervention of the Trai. We have been killing each other for three and a half years. Floor for tariffs is the only way to get sanity in the market. Also, the fact that the three of us have written to the regulator says something. First time COAI has an agreement on what to write.
Vodafone Idea has said the company could be headed to insolvency, what does that mean for the sector?
Nick Read and Kumar Mangalam Birla both have made that statement and it is in that backdrop I am saying that we need three plus one operator (three private and one public sector). It will be very self-serving for me to say that 2 plus one operators (two private and one public sector) is fine. I was the first private sector guy in telecom, and from my perspective I think India needs 3 plus one model. It is the 2nd largest market in the world. China has three operators, America has four operators. There is massive need of telecom for PM’s Digital India vision. Telecom has seen a brutal price war in the last three years and the result is broken balance sheets, 8 companies collapsed, went bankrupt or were sold for nothing. What we have now must be protected and for that the government must do whatever it can to support in whichever way they can. The govt must have a sympathetic view towards the industry.
Govt has given a moratorium and tariffs have also risen, would you still call the situation dire?
Situation is dire. It is a matter of survival for everyone. Vodafone is in losses, Airtel is in losses, BSNL is in losses. There is one competitor who has unlimited access to finances, I wouldn’t comment on that but the situation is bad. Moratorium of two years can only help Vodafone Idea if there is an AGR relief. Otherwise, it is just deferment with interest. Lower the taxes, and find ways and means to support the sector in one form or the other and most importantly, the honourable SC needs to look at our review petition from the point of view that there are unintended consequences and lots of other companies including public sector are coming into this unreasonable AGR definition which could have never been the intention. So, have we failed to explain to properly? We should take some part of the blame on our legal team. My view is DoT was equally unaware of the ramifications it could have had.
Is the situation dire for Airtel as well?
We are holding out, fighting it out in the market place. I would say we are in a better situation, we are in the middle of raising funds. However, network expansion, investment in newer technologies, bidding for 5G spectrum and then building 5G ecosystem which India deserves, need the industry to become viable. Tariffs need to go up.
What support are you seeking from the government?
Levies. I have repeatedly said, you can’t tax telecom services like sin tax ! 30% of revenues are going in one or the other form of government levies, that must come down. Our hope was that the committee of secretaries would have recommended some reduction in levies. That has not happened. We urge the govt to take it up in a separate forum.
I mentioned to the secretary telecom that the Licence Fee, spectrum usage charge need to go down. Input tax credit is with the finance ministry. I believe that it will be taken up by the GST council, but given the situation of finances, I really doubt anything will happen there. Even if they cannot refund it, they can at least offset it. Rs 36,000 crore, this is sizeable sum of money, we get no interest on it but we pay interest on it.
Airtel filed a review petition in the AGR matter, have you had any discussions with the government?
AGR has been a bolt from the blue. It is a big bolt or jolt to the industry when already the chips were down and this has come on top of that. Our legal team were not able to persuade the Honourable Supreme court on the unreasonableness of DoTs AGR interpretation but equally, I think DoT didn’t realise the unintended consequences on the larger ecosystem. I mean Gail, Railtel, PGCIL, DMRC everyone is impacted. Now you will charge licence fee of telecom services on sale of gas ? Ramifications were huge and we hope the honourable SC will consider this issue.
Is this the toughest period the industry has undergone so far ?
We have gone through several crisis but this is the most difficult time for the industry. This is a time when digital ecosystem is most required in the country. It is an odd situation, We need a digital ecosystem to support new age industries and the telecom industry which was to play a crucial role in that is in the crisis.
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4 Comments on this Story
tnsmurthy443 days ago
Maximum retail price,I have heard not minimum retail price policy. Air tell charge Rs 16 per min in 1996/20 as a first mover.So what is wrong with Jio.
Who asked Airtel to burn money in Africa,instead of investing in technology.
Kumar 445 days ago
Jio wants to punish other competitors by arm twisting policies. I remember how Vodafone was asked to pay ~$2 Bn a few years ago, in retrospective taxes under GAAR. Then Sibal's son became their counsel and they were let go. Policies are being run per the whims and fancies of the ruling party and its patrons.
ranganathan mv445 days ago
The policy by the Gov must be like when Maran was the communication minister. I am not telling that we should replicate the same policy. But the Gov can frame policy to charge any industry the minimum possible rates keeping in mind the gov budget of collection of taxes or charges so that economy will revive.