Telecom Budget 2013 creates mixed response from industry

Telecom Lead Asia: Indian telecom industry has shared mixed response to the Union Budget 2013-14.

Some of the main announcements in the Budget that may affect the telecom industry directly include hike in duty on mobile phones, 5 percent increase in duty on STB, etc.

Harit Nagpal, president of the DTH Operators Association of India and MD & CEO of Tata Sky, said: “DTH industry is already paying 32  percent of its revenue as taxes. At a time like this, when  the government’s  Digitization mandate  is entering its 2nd  phase, the industry requirement is many times normal and there is no local manufacturer of repute who can deliver quality boxes in such quantities. Therefore, this increase seems out of place and in all fairness should be reversed.”

Asim Warsi, VP, Samsung Mobile, said: “The increase in the excise duty on mobile phones will not have a positive impact on the mobile industry and should lead to an increase in prices for end consumers.”

But SN Rai, co-founder & director, Lava International, has a different view. “Excise duty proposed in the union budget on mobile phones priced Rs 2000 and above will have a very high impact on the industry,” Rai added.

TM Ramakrishnan, CEO – Devices, S Mobility, has echoed the same sentiment, saying: “Indian mobile handsets industry is facing difficult times with increased competition and price wars at large. With the proposed increase in tax for handsets above Rs 2,000, we do not see a decrease in demand but definitely, there will be pressure on the margins. This decision will surely impact the industry’s focus on making smartphones more affordable. At the same time, rural areas might get that much more difficult for smartphones to penetrate.”

According to Rai, the industry is already suffering from non uniform VAT issue and the increase in the duty further escalate the prices. Also, this step is a discouraging move to the domestic industry which is looking at making India manufacturing base for mobile phones.

Samsung Mobile VP has welcomed the Budget, saying the benefits announced for key sectors like infrastructure, agriculture and education are bound to positively impact the economy. This year’s budget initiatives focusing on women and youth also resonate well.

“The 15 percent investment allowance on  manufacturing investment should give a fillip to domestic manufacturing. However, in overall terms, we do not see the Budget reviving the consumer sentiments in the absence of any specific incentives to boost consumer sentiment itself,” Warsi added.

Syed Safawi, CEO – Viom Networks, said: “The budget’s focus to bolster the country’s infrastructure has positives for the private sector by way of encouragement of infrastructure debt funds and credit enhancement to infrastructure companies that wish to access the bond market to tap long term funds via IIFCL and ADB.”

Allowing institutions to issue tax free bonds up to a total sum of Rs. 50,000 crore is certainly a positive. However, the high expectation of assistance to telecom tower companies that have been granted the status of harmonized infrastructure sector has gone in vain.

“The telecom towers are critical for enabling deeper broadband penetration to support the Government’s objective of inclusive development by way of providing a range of services including e-health, e-education, e-governance and even the Direct Transfer Scheme,” Safawi added.

According to Safawi, the financial restructuring scheme for DISCOMs by respective State Governments will ensure availability of reliable grid power that will enable the telecom sector to reduce its dependency on diesel and benefit both the environment and drive efficiency for the sector.

Also, the fund support to IREDA will enable the telecom industry to gradually shift a portion of its energy utilization from fossil fuels to renewable sources of energy such as solar and provide a fillip to the telecom industry’s efforts to imbibe renewable sources of energy.

Deepak Kapoor, chairman, PwC India, said: “This budget is clearly a response to the prevailing socio-economic circumstances in the country. The Finance Minister has put forward a people’s budget.”

The most reassuring aspect of the budget today is the Finance Minister’s acknowledgement of the criticality of continued inflow of foreign investments for augmenting the country’s growth.

The focus is clearly on the imperative of maintaining a healthy environment to mobilise it. The Finance Minister has also done well to place continued emphasis on the infrastructure sector, particularly, social infrastructure, which is really the need of the hour.

Partha Iyengar, country manager – Gartner India, said: “The big overarching focus on growth by the FM is the fundamental ‘feel good’ factor in this budget. Given the fact that one can argue that a lot of the weakness in the Indian economy is what I call a ‘sentimental recession’, his strong statement that there is no grounds for ‘doom and gloom’ heading into the new year.

The big specific positives of the budget are that he has focused both in terms of the letter and spirit of the budget on the key planks of growth for India and health of every industry, including IT, which is Infrastructure, Education, Skills Development, and incentives for the growth of domestic manufacturing.

Some of the other positive areas are support for entrepreneurship, the MSME sector, both in terms of financial and overall support. The recognition that the overseas ‘trust deficit’ in terms of a comfort level on India’s investment climate has to be addressed is also welcome.

However, the budget is only a directional statement, and the challenge for India historically and even currently is in the execution of the statement of intent outlined in the budget.

This has been India’s Achilles’ heel, in that bold pronouncements in the budget never see the light of day or are not implemented as effectively as they can or should be. So it was disappointing to not see any statements on what the government would do to ensure mechanisms/oversight to ensure speedy and efficient implementation of these programs.

A part of the telecom industry feels that the Union Budget presented by the Finance Minister has been a disappointment for the  already struggling telecom industry.

Hariharan Iyer, country head for India and SAARC Region, DONJIN Communication Technology, said: “After the telecom scam which destabilized the entire telecom industry couple of years ago, a lot was expected from this budget so as to provide some stability to this industry.”

However it seems that the Finance Ministry has chosen to completely ignore this segment which will mean that this industry will actually have to look upon the other segment’s growth for its own growth.

A $1 trillion infrastructure investment in the 12th plan and education sector getting a major budget allotment (Rs 67,000 crore) will indirectly drive this telecom industry. The peak duties have been left untouched while handsets above Rs 2,000 will see an increase in the custom duties will retard  the implementation of 3G/4G  services since these services necessarily require smart phones. This can result in lower offtake of  smartphones like iPhone, BlackBerry, Galaxy etc.

According to DONJIN CEO, this also means that VAS services which depend on the platforms which are imported will continue to remain elusive to majority of the population.  This budget encourages local manufacturing of equipments and semi-conductor devices which have got reduced duties, but the big question which still remains is in country like India where bureaucracy reigns supreme will someone actually get into manufacturing of products.

Gopal Kumar Jiwarajka, chairman & managing director, Salora International, said: “I am disappointed with increase in duty of mobile phones. This will make grey market stronger. Also will act as dampener to further investment in manufacturing. Also there’s no proposal to curb unabated import of flat panel TV as personal baggage.”

The finance minister has proposed the reduction of fiscal deficit to 4.8 percent which will be big challenge keeping in mind.

Debasis Chatterji, CEO of Netxcell, said: “As such there are no benefits to boost telecom sector. On the contrary, enhancement of excise duty from 1 percent to 6 percent on mobile phone, costing more than INR 2000, is going to make smart-phones more expensive. Smart phones are needed to experience 3G and 4G. Because of the price rise, users in tier 2 and 3 cities and upcountry will fill the pinch to buy smartphone to experience 3G and 4G.”

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