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Thursday, February 2, 2023

Indian Telcos Want Govt to Cut License Fee, but its Not Happening

The Indian telecom operators have been looking for a lot of help from the government. The sector had been under severe stress for cash because of the low average revenue per user (ARPU) figure impacting the overall revenues of the operators negatively. To address the cashflow stress that the telcos were facing, the Department of Telecommunications (DoT), in September 2021, announced plenty of relief measures. While the measures were good, they were nothing but just a starting point for the government to set affairs into order for the telcos. Indian government plans to offer more relief to the operators in the coming time. In fact, gradually, many things have been rectified, and a new central online RoW (Right of Way) portal was also announced.

Govt Hasn’t Listened to Telcos’ Request to Cut Down LF Percentage

One thing that the telcos have wanted for a long time hasn’t happened until now. The operators wanted the government to cut the license fee (LF) from 8% to 1%. For the unaware, the telecom license fee is currently 8% of the adjusted gross revenue (AGR). This 8% includes 3% LF and 5% contribution towards the USOF (universal service obligation fund). The aim of USOF is to enable users across the length and breadth of the country to get access to quality internet and connectivity services.

The telcos have time and again asked the government to abolish the USOF contribution from the existing LF and reduce the remaining 3% LF to 1%. It would help the telcos in boosting their investments and bring new technologies and services to customers fast. Despite numerous requests, the Indian government has not heard the telcos.

A few days back, the Cellular Operators Association of India (COAI) also asked the government to consider bringing down the LF for the telecom sector to 1% in the next year’s budget proposals. Even if the government doesn’t abolish the USOF but cuts down the LF by 2%, it could result in the saving of thousands of crores for the telcos.

It is also worth noting that the Indian telecom operators are pulling their weight and also investing in rural areas, where they know they won’t get the return on their investments back quickly. The purpose of USOF is to enable digital connectivity in rural areas, and the telcos are already doing that. Thus, it would be in the interest of the government and the nation to reduce USOF as well. This is because the telcos will get more freedom to invest their savings into the rural sector, which is now being covered fast.

5G is going to be capex intensive as the need for small cells, street furniture, fibre, and more would increase multiple folds. Thus, the telcos would be eagerly waiting for the government to reduce the LF so that they can add a boost to their plans in a full-fledged manner.

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