Top telecom companies write to Centre to slash levies for 5G viability

Top telecoms companies, including Reliance Jio, Vodafone Idea and Bharti Airtel, have written to the Centre asking to cut down levies highlighting that the sector requires financial support and exemption for viability and sustenance. The sector, through the Cellular Operators Association of India (COAI), has asked the government to reduce the licence fees from 3 per cent to 1 per cent, a report in The Economic Times said.  

The companies also asked for a deferral of the universal service obligation levy of 5 per cent until funds to the value of Rs 64,774 crore are exhausted. 

Talking about the challenges with the rollout of 5G services, COAI director general SP Kochhar said: “5G is being deployed rapidly across the country, but revenues can be gained from the same only once the market matures, use cases are established and the enterprise uptake of the services is realised."  

He added: "While the debt-laden telecom sector has put in massive investments and efforts to ensure India gets the world's fastest 5G rollout, it also needs more financial relaxation and support for viability and sustenance." 

According to ICRA, the telecom industry is currently having a debt of around Rs 6.3 lakh crore at the end of FY2023. 

COAI has recently written to the government on these issues. 

Both Reliance Jio and Bharti Airtel have been aggressively rolling out 5G services across the country and have covered over 400 and 500 cities and towns each.  

Market leader Jio was the largest bidder in the 5G airwave auctions help last year, where it spend Rs 88,078 crore. Airtel and Vodafone Idea bought airwaves worth Rs 43,084 crore and Rs 18,799 crore, respectively. An ICICI Securities report stated that Jio and Airtel can spend around Rs 94,000 crore and Rs 66,600 crore for 5G coverage in the next five financial years, respectively. 

On the other hand, Vodafone Idea is yet to announce its 5G rollout plans. 

Prashant Singhal, emerging markets TMT leader at EY, told ET that the Indian telecom sector is one of the highest taxed globally at present. The regulatory levies and taxes at present are approximately 30 per cent of the revenues. Besides this, the income tax account for 35 per cent to 38 per cent of the revenue. 

“There is an urgent need to rationalise the levies in light of the investments needed in the sector for 5G rollout, including fiber rollouts and home broadband,” Singhal said. 

Ahead of the Budget this year, COAI had written to the government asking it to support the expansion of infrastructure, mainly around the rollout of 5G networks and the development of internet connectivity in rural areas. The apex telecom lobby had said that as telecom is one of the highly regulated sectors in the country, it is expecting relief in terms of taxes and regulatory levies on telecom operators to encourage the flow of investment in the industry.   

Though the government didn’t do much in this regard, the government has allocated Rs 1.23-lakh crore for postal and telecom projects including Rs 1,52,937 crore capital infusion in State-run BSNL. 

After the Budget 2023, Kochhar had said: “The industry had requested for some measures to be introduced in the Budget 2023-24 to ease the regulatory and financial burden on the sector. We are hopeful that the industry’s suggestions to reduce regulatory levies like license fee, deferring USOF contribution till the existing funds are exhausted, exemption of basic customs duty on telecom equipment, waiving of GST on regulatory payments, refund of ITC, among others, will be considered and addressed by the government during the course of the year.”  

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