Why India telecoms need life saving support from Government

India telecom industry revenue in recent quarters
India telecom operators are currently looking for life saving support system from the Government in order to improve their business conditions.

Their condition is so critical. For instance, Indian telecom operators’ quarterly revenue nosedived to Rs 48,137 crore in Q4 fiscal 2017 from Rs 47,661 crore in Q3, Rs 51,877 crore in Q2, Rs 54,961 crore in Q1 and Rs 50,036 crore in Q4 fiscal 2016.

Profit of Airtel fell to Rs 187 crore in Q4 fiscal 2017 from Rs 422 crore in Q3, Rs 1,828 crore in Q2, Rs 1,428 crore in Q1 and Rs 1,699 crore in Q4 fiscal 2016.

Airtel says return on investment dropped to 3.4 percent in Q4 fiscal 2017 from 3.5 percent in Q3, 6.2 percent in Q2, 6.3 percent in Q1 and 6.1 percent in Q4 fiscal 2016.

Since Indian telecom operators are unable to compete with Reliance Jio’s free offers, they submitted several suggestions.

Following the launch of Jio 4G service, the entire viability /  intent of current IUC has been destroyed. The traffic asymmetry with Jio is extremely high – 92 percent incoming calls vs. 8 percent outgoing – which has led to transfer of cost from Reliance Jio to incumbent operators.

Government should correct IUC and fix at full cost incurred by the terminating operator.

Airtel said TRAI should be restrained from any further reduction till the matter is adjudicated in the court as it would cause an irreparable financial loss to Airtel and other similarly placed operators.

Currently telecom operators pay 8 percent of AGR as license fees, of which 5 percent is contribution towards USOF.

Since the Indian Government is not using majority of the USOF levy effectively, the government should reduce license fees from present 8 percent to 3 percent.

Currently the SUC regime has become complex due to multiplicity of rates to different spectrum. Current SUC regime leads to anomalous results and greater tax burden on the subscriber. Current charges are also exceptionally high compared to other Asian economies and other developed telecom regimes wherein SUC is only taken to account for administrative costs.

Government should look at reducing the SUC rate to 1 percent of AGR. SUC for microwave spectrum should be subsumed into proposed 1 percent SUC rate.

The current SUC order mandates payment of SUC subjected to floor rate. Since, the revenues have dropped in 2016-17, benefit of SUC rate reduction to minimum 3 percent of AGR last year could not be realized due to the mandated floor

The Government should increase moratorium period to 5 years from the current 2 years. Govt. should increase the number of installments to 15 from the current 10. This should be applicable on all spectrum acquired from 2012 till date.

Interest rates should be linked with 10 year G-Sec & benchmarked each year. GST rate should be a maximum of 12 percent.

Operators should continue to have the right to retain customers through offers and discounts – this is a fundamental right in any business.