Group of Secretaries to examine financial challenges being faced by telecom sector

Our Bureau New Delhi | Updated on October 29, 2019

A Committee of Secretaries (CoS) under Cabinet Secretary Rajiv Gauba will examine, and suggest measures to mitigate, the financial stress faced by the telecom sector, keeping in view the larger public interest and improving telecom services for subscribers.

The CoS will look into the demand of telecom service providers for deferment of spectrum auction payment due for the years 2020-21 and 2021-22, in order to ease cash flows in the industry, an official note seen by BusinessLine read.

Also on the agenda will be a re-look at the Universal Service Obligation Fund (USOF) charge, which is currently at 5 per cent, while the TRAI in its earlier recommendations had suggested the reduction of this charge to 3 per cent. TSPs’ request for reduction of spectrum usage charges (SUC) may also be examined, it said.

"Representations have been received from major TSPs regarding the financial stress being faced by them. Future commitments for payment of spectrum purchased by TSPs and the licence fee, including the contribution to USOF, have been cited as issues which require to be looked into. In this regard, TRAI’s recommendations for a reduction of USOF contribution and spectrum usage charge is being relied upon by the TSPs," the document said.

"The TSPs claim that a large amount of input tax credit is available to their credit in government accounts, which they request should be adjusted against future government levies. Further, the recent Supreme Court order on the definition of average gross revenue (AGR) is expected to further enhance the financial stress of these TSPs. A case is also being made for viable pricing for voice and data, which falls in the realm of TRAI," it added.

In parallel, it is expected that TRAI will also examine the aspect of minimum charge for voice and data services to ensure that the financial health of the telecom sector remains robust and viability is sustained, the document said.

According to the note, an analysis of the financial performance of the TSPs reveals that the aggregate gross revenue of the industry between the years 2017-18 and 2018-19 has decreased. The price of data for the customer, at an average of ₹8 per GB, is perhaps the lowest in the world. The average revenue per user (ARPU) per month has declined from ₹174 in 2014-15 to ₹113 in 2018-19. It is also estimated that a subscriber on an average uses 10GB of data and 700 minutes of mobile talk time per month.

The CoS is expected to meet shortly and submit its recommendations in a time-bound manner.

According to analysts, now the decision on the recent issues of AGR will come from the government as they know the financial and market situation right now, and they also know that spectrum auction is also possible in the next few months.

“Government itself had gone to the court and insisted for such decision so government has to take a decision and such decisions cannot come from a single bureaucrat...government has to take a political decision now. For the TSPs, they cannot do much now as the decision has come from the highest court of the land,” said an industry watcher.

Published on October 29, 2019

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