India's top telecoms companies, including Reliance Jio, Vodafone Idea and Bharti Airtel, have appealed to the government for reduced levies, saying the sector requires more financial relaxation and support for viability and sustenance. Through the Cellular Operators Association of India, the industry is seeking a reduction in licence fees, from 3% to 1% and a deferral of the universal service obligation levy of 5% until funds to the value of INR64,774 crore are exhausted. The telecom industry is predicted to have closed FY2023 with around INR6.3 lakh crore of debt (approx. $85bn).
India's top telcos Reliance Jio, Bharti Airtel and Vodafone Idea have called on the government to sharply reduce levies, reasoning that they are investing top dollars for the fastest 5G rollout seen anywhere in the world but have no clear visibility in terms of additional revenue from the next-gen services. The top telcos, through industry body Cellular Operators Association of India (COAI), want the licence fee to be brought down to 1% from 3%, and the USO (universal service obligation) levy of 5% be deferred till the ₹64,774 crore lying in the fund gets exhausted.
As per ICRA, the telecom industry is expected to have closed FY2023 with a debt of around ₹6.3 lakh crore.
'Financial relief needed' "5G is being deployed rapidly across the country, but revenues can be gained from the same only once the market matures, use cases are established and the enterprise uptake of the services is realised," COAI director general SP Kochhar told ET.
"While the debt-laden telecom sector has put in massive investments and efforts to ensure India gets the world's fastest 5G rollout, it also needs more financial relaxation and support for viability and sustenance," he added.
COAI has recently written to the government on these issues.
Reliance Jio and Bharti Airtel are currently rapidly rolling out 5G services and have already covered over 400 and 500 cities and towns each, respectively. Jio spent the most in last year's 5G spectrum auction, buying airwaves worth ₹88,078 crore while Airtel bought spectrum worth ₹43,084 crore. Vodafone Idea, which acquired 5G airwaves for ₹18,799 crore, has not yet announced 5G rollout plans.
An ICICI Securities report expects Jio and Airtel to spend around ₹94,000 crore and ₹66,600 crore for 5G coverage in the next five financial years, respectively.
"There is an urgent need to rationalise the levies in light of the investments needed in the sector for 5G rollout, including fiber rollouts and home broadband," said Prashant Singhal, emerging markets TMT leader at EY.
He added that the Indian telecom sector is one of the highest taxed globally. Current regulatory levies and taxes are approximately 30% of the revenues. And after adding income tax, they account for 35% to 38% of the revenue.
Licence fee "In most countries, telecom licence fee is negligible, or a one-time upfront payment is required...Accumulation of GST credits has added to the working capital woes of the operators," Singhal said.
Industry executives also say that there is a lack of monetisation opportunities and use cases for 5G as of now, with telcos choosing not to set higher tariffs for the next-gen services.
Bharti Airtel managing director (India and South Asia) Gopal Vittal had also recently said that most of the 5G use cases were still not commercially relevant. Further, he had said that competitive pressures are not allowing tariffs to rise.
"A bank today gives you a 7-8% return on capital. In the telecom industry, it is less than 8%. I would much rather put the money into a bank deposit and have the same return without taking all this risk. So, the financial viability of the industry needs to improve," Vittal had said during the ETTelecom 5G Congress 2023.
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