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Telecoms sector is picking up steam but will need structural changes to survive

The aid plan announced by the Center will only provide a temporary respite to indebted telecommunications operators by postponing regulatory payments for four years. The problems faced by the sector can only find a long-term solution if the Center reduces the annual levies in the form of fees and if the operators are able to increase the tariffs to 200 per user per month from 140.

The main concerns of the telecommunications sectors are its massive debt of nearly 4 lakh crore and the lack of revenue growth commensurate with the increase in data usage. The new package does not address any of these issues.

33% lost revenue

BK Syngal, former president of VSNL, said: “No action has been taken to reduce license fees by 8%, spectrum fees or GST by 18%, all of which steal 33% of revenue earned by operators in the government’s pot. . If these issues are not resolved, the industry will continue to pay high taxes that could otherwise have been reinvested. The current package has only delayed the inevitable.

AGR Verdict

While the decision to exclude non-telecom revenues from the definition of Adjusted Gross Income (AGR) will help operators in the future, it does not remove the current burden of having to pay close to ₹ 1 crore. lakh as a result of the Supreme Court. verdict.

Sanjay Kapoor, former CEO of Airtel, said: “The problem of defining AGR is a problem of the past and the industry may have already transformed itself by bypassing this problem. However, clarity on the new definition of AGR helps.

The package provides clarification on a number of issues, including spectrum auction schedules, increasing spectrum ownership duration, and 100% IDE through automatic rotation.

Prashant Singhal, TMT Emerging Markers Leader, EY, said, “The package will bring clarity going forward, which will help restore investor confidence to attract foreign investment.”

Increase cash flow

But the real hope for the industry would be to be able to increase tariffs in the near future.

“A 4-year moratorium gives the industry enough time to make fundamental improvements by increasing tariffs, which is essential from an industry perspective. Over the next four years, operators can do a number of things, including attracting new investors, innovating in services, and improving quality to increase cash flow so that when the moratorium ends, they are able to to make regulatory payments, ”said an industry expert.

TV Ramachandran, chairman of the Broadband India Forum, said clarity on AGR payments and the ten-year spectrum ownership extension are the two biggest reforms since the new telecommunications policy of 1999.

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