High Levies Set To Strangle Telecom Sector

The stiff licence fees and spectrum usage charges will impair the capacity of telecom majors to invest in infrastructure.

- V Sridhar

The recent Supreme Court judgment on upholding the definition of Adjusted Gross Revenue (AGR) to include all revenues earned by the licensed Telecom Service Providers (TSPs), and just those of core services, appears to be the death knell for TSPs. While the dispute over the definition of AGR has been on since 1999, the important aspects are the Annual License Fee (LF) of 8 per cent and Annual Spectrum Usage Charges (SUC) of about 1-6 per cent of AGR payout to be made by the TSP (along with interest and penalties), which are likely to throw the TSPs into a debt trap that we as a nation can ill-afford.

Telecom has been one of the brightest spots in India’s liberalisation journey, with the country being the second-largest in mobile subscribers and even mobile broadband subscriber base, next only to China and beating the US. Telecom and broadband Internet have string multiplier effects on the economy, leading to large-scale digitisation of consumer-facing services — including digital finance and commerce platforms — thus augmenting transparency, reducing information asymmetry, and most importantly, allowing for nurturing of the digital start-ups and innovation ecosystems in the country.

Telecom and broadband form a very important infrastructure backbone in the country, which — unlike the others such as water, electricity, and sewage — is primarily driven by private firms. Hence losses, debt and unsustainability in this industry are likely to manifest in various forms, including government provisioning of digital services. What is the way out?

Regulatory fee