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Jio Rivals Say Government Policy Should Allow Telcos to Cover Costs

Jio Rivals Say Government Policy Should Allow Telcos to Cover Costs

By Press Trust of India | Updated: 19 June 2017 16:44 IST

Highlights

Idea agreed to the lower data price plan
Besides, it favoured lowering of spectrum usage charges
Reliance Jio ascribed the financial stress in the telecom sector recently

Idea Cellular on Friday said at the IMG meeting that it supports lower data prices but the government policy framework should allow operators to recover their network costs.

Vodafone, on the other hand, said that call connect charge - currently at 14 paise - is already "below cost" and any further cut in these inter-operator charges could hurt rural coverage.

Besides, it favoured lowering of spectrum usage charges (or doing away with it) as also that the USO levy should be reduced to 3 percent from 5 percent and then be phased out.

Making presentations before the inter-ministerial group (IMG), incumbent operators, including Airtel, flagged various issues facing the industry, leading to huge debts.

Speaking to reporters after its meeting, a top Idea official said: "Government has choice of any policy...but it should cover costs. All policy framework everywhere says that cost of network should be recovered."

The Idea official further said that the company is completely in agreement that data prices need to come down.

Flagging the high incidence of taxation faced by the industry, the official said levies like licence fee, spectrum usage charges and USO should be subsumed by GST, the new indirect tax regime to be rolled out from July 1.

Vodafone too has suggested that licence fee be subsumed by the Goods and Services Tax and if that's not possible then GST rate should be reduced to 5 percent from 18 percent for telecom services.

Airtel officials, however, refused to comment on the presentation made to the government.

The IMG, constituted to suggest policy reform to mitigate sector's financial stress, has been holding dialogue with individual operators this entire week.

It has already met senior executives from Reliance Jio, Reliance Communications, Tata Teleservices and Aircel. It has also held discussions with telecom PSUs Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd too.

The IMG also met four major lenders, including SBI, who voiced concerns over "stress" in the telecom sector and flagged possibility of defaults by debt-laden operators.

The incumbent operators have been vocal about the onslaught of free voice and data offers by the aggressive newcomer Reliance Jio (RJio), and its impact on the industry's revenue in 2016-17.

Reliance Jio earlier this week, however, ascribed the financial stress in the telecom sector to existing operators like Bharti Airtel and Idea running businesses on debt and investing heavily in unrelated sectors.

It alleged that incumbent operators have been reluctant in infusing equity and hence the financial stress is their own creation.

The operators on the other hand cite Rs. 4.6 lakh crores cumulative debt, and are making a case for urgent relief measures like extension on payment of deferred spectrum liability to a period of 20 years, and cut in licence fee and spectrum usage charges.

With over 1.16 billion mobile users, India is the second largest telecom market in the world, after China.

Telecom regulator TRAI also met all the operators on Thursday to discuss the industry's financial difficulties and measures that can be taken to ease the situation. Idea asked TRAI to fix a minimum floor price for voice calls and data offerings.

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