The Hindu Business Line : Telecom cos save on revenue share, bring down STD rates

New Delhi, May 20 The Government may want more revenues from telecom operators, but large integrated players including Bharti Airtel have found a smart way to save at least Rs 1,000 crore a year in the form of licence fee revenue share.

In the current licence fee regime, telecom companies providing the whole gamut of services, including long distance telephony, are required to pay only 6 per cent of the annual revenues from long distance services compared to a total levy of 12 per cent for mobile services. These companies are saving on the net outgo to the Government by loading higher revenue component to their long distance licence.

For example, Bharti recently increased its long distance carriage charge from 25 paise a minute to around 60 paise. This means that if STD rates are at Rs 1.50 a minute, Bharti is passing on almost 45 per cent of the revenues on to its long distance arm compared to just 10 per cent earlier. Through this arrangement, Bharti can easily save about Rs 200 crore by paying a lower revenue share to the Government. Operators also save as they do not have to pay spectrum charges on the long distance revenue compared to about 2 per cent of the revenues from cellular services. The savings, however, have enabled the operators to lower the STD rates considerably from Rs 2.60 a minute to Rs 1.50 a minute.

That’s not all. The integrated companies are also carrying their intra circle mobile-to-mobile calls on their own long distance network. Latest quarterly report shows that Bharti carried nearly 89 billion minutes on its cellular network. According to industry estimates, almost 70 per cent of all mobile calls are within the same circle. This means that a part of the revenue from nearly 60 billion minutes of intra circle calls is being routed through the national long distance network. That’s another Rs 800 crore saving out of the amount that the company pays to the Government as revenue share. This has enabled operators to offer intra circle calls within their own network at low tariffs. Reliance Communciations, for instance, is offering Reliance-to-Reliance calls at 40 paise a minute.

However, despite the new practice, the Government may not end up getting any lesser amount from telecom operators. Increasing subscriber base, booming minutes of usage coupled with the entry of new players will keep the Government’s coffers rolling. In 2007-08, the Government earned Rs 10,000 crore from licence fee and spectrum charges. This is estimated to go up to Rs 20,000 crore in 2008-09 as operators’ overall revenue base increases.

Officials in the Department of Telecom said that the operators were within the rules in following the new routing scheme. Bharti executives said that while they did not comment on commercial aspects of the business, they were fully compliant with all regulatory norms. “There are a number of operators with a long distance licence and they can also leverage their network. Operators are under pressure to reduce tariffs all the time due to the competition and, therefore, it is up to them to find the best way keep their business profitable,” said an industry analyst.

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