Videocon Telecom, one of the new players in the mobile scene, is expecting the new Government to address outstanding issue of the telecom industry particularly those related to spectrum. Arvind Bali, CEO of Videocon Telecom lists out his views on what the Government should be doing to bring back growth to the sector

With the new Government coming in, what are your expectations when it comes to Telecom?

While Telecom contributes approx 3% to the national GDP, the industry is struggling & is highly debt ridden. I feel it is the most regulated, capex intensive industry with very high entry barriers. The industry witnessed its all time low during the last 5 years with lots of uncertainties hovering around including cancellation of licenses by the Hon’ble Supreme Court. For players like us, it’s a new beginning & we are looking forward to reforms & liberalized policies around spectrum trading, spectrum sharing, M&A, benefits of infrastructure status.

What are your views on M&A policy & Spectrum trading policy? Do you foresee any changes around these?

M&A guidelines’ has been the most sought after policy initiative. However, I feel that the same has somewhat not done justice to the industry expectations. The policy has practically not resulted in any consolidation whatsoever. I feel the policy could be more liberal to synergize the industry through consolidation & operation optimization. The key issues like the debt of the companies, consolidation of spectrum, taxation etc. still needs to be addressed.

Further, while Spectrum Trading has been approved in principle, the norms are yet to be decided which is pending since long. An early Spectrum trading policy finalization would bring efficiency as well as higher revenue for the exchequer.

As a new Telco, do you have any specific expectation from the new Government?

In 2009, we entered the telecom market amongst other new operators & the competition which was healthy brought down the rates & increased usage. There was still a huge disparity with the incumbents which had the first mover advantage not only in having a lot of time to acquire customers, but also in the fact that they were given spectrum at administrative prices. We were a late entrant & paid hefty spectrum cost. We were already on a big disadvantage. With no fault of ours, quashing of licenses by the Hon’ble Supreme Court left us with a huge burden of accumulated losses & a loss of approximately 7.2 million Subscribers. To ensure that the new operators stay in the race, to encourage healthy competition & to achieve more rural telecom penetration, I think that the new Government should come out with a policy around incentivizing new players. This policy initiative by this new pro-business Government could help new telcos to evolve further to achieve market competiveness & help them to share part of the spectrum (new telcos at any given point of time have a lower subscriber base than incumbents) will help them realize some returns on their huge investments & end the current lopsided hyper competitive marketplace.

New operators could be allowed to plough back the License Fee and Spectrum Usage Charges for the expansion of their network at least for 5 years; alternatively, the new operators may be allowed to pay nominal Spectrum Usage Charges and License Fee.

In your opinion, should the new Government look at the issue of heavy taxes of the Telecom sector? If yes, then how?

Telecom is a highly capital intensive industry with ever reducing price of services. The Opex burden for new operators is unbearable with the huge cost of spectrum paid up-front. Further, in the current regime, we pay approx 25% of our Revenue as License fee, SUC and other taxes and levies. In my view, to provide a level playing feel to new operators & to encourage competition in Telecom sector, which is very necessary, new operators who were allocated spectrum through auction i.e. at an exorbitant Market price, should be charged SUC of 1% odd to the extent to cover the administrative expenses unlike the incumbents who were allocated spectrum administratively, where there was no payment by the operator for spectrum allocation. Further, from a macro view, a look into the taxation policies and much should be done regarding simplifying the GST policy, which will help bring greater traction in the industry.

How should the new Government emphasise on commercial usage and auctioning of the spectrum?

I think it’s important that Spectrum across all bands (700, 800, 900 & 1800 Mhz) along with spectrum being vacated from the licensees due for renewal in next 2 year should be put up for auction in one-go to derive the actual market value of the spectrum and to attract a larger participation.

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