CHENNAI: Indian telcos’ current financial woes are the direct result of a cost-income mismatch, with realisations at current tariff levels proving inadequate in the face of high statutory and capital expenditures. Nursing the sector back to health would require fixing this gap, SP Kochhar, Director General of the Cellular Operators Association of India (COAI), told this publication in an interaction.
“The industry has very high expenditure levels at present and it is important to bring them down,” Kochhar said, noting that the level of taxation in India was among the highest in the world. Reducing these statutory levies would go a long way in providing relief to the sector, he said, while rolling out a floor tariff system would ensure that tariffs remain at sustainable levels.
India’s telecom sector, which once boasted over a dozen operators, is now down to just three private players in addition to the state-run BSNL-MTNL combine. With Vodafone Idea, the third largest telco in India, in deep financial crisis, both industry executives and analysts have warned that India may be reduced to an effective duopoly if the government offered no support.
“The association and all our members are of the same view here..,” said Kochhar, “that the 3+1 (three private players plus BSNL-MTNL) structure needs to be preserved”. Both floor tariffs and a sharp reduction in taxation find place in the COAI’s latest letter to the Department of Telecommunications sent earlier this week.
The association, which represents all three private telcos, said in the letter that the “government needs to recognise that the current revenue-sharing regime of around 32% revenue outgo as taxes and levies is unsustainable”.
Among the measures it suggests is a cut in licence fee from 3% of adjusted gross revenue (AGR) to 1%; a 3% cut in spectrum usage charges; and a reduction in the mandated 5% contribution to the Universal Service Obligation Fund (USOF) to 1%. It has also requested a review of the definition of AGR on a “prospective basis”.