Debt burden mounts as telecom operators get into price war: Assocham-KPMG study

Even as the telecom industry finds itself in a tariff war following the entry of a major industry player, an Assocham-KPMG paper has pointed towards the operators grappling with a huge debt of Rs 3.80 lakh crore, reinforcing a case for rationalisation of taxes and other levies along with spectrum charges.

Telecom operators have an accumulated debt of around Rs 3.8 lakh crore. An additional customs duty of 10 percent will increase the cumulative duty to 29.44 percent, revealed the joint study.

"Even though consumers are having the last laugh, with competitive offers from major players, the service providers need to penetrate further into the fast expanding data market and create a volume that would make their cash flow running," said ASSOCHAM Secretary General, D S Rawat.

Simplification and rationalisation of tax regime will provide the required financial stability to the Indian telecom industry. Presently, multiple charges and taxes are levied on operators in the sector apart. In addition to this,  charges are paid by other industries (such as corporate tax, VAT, etc.) as well. Spectrum Usage Charges (SUC) in India are comparatively higher than other economies, noted ASSOCHAM-KPMG joint study.

Telecom sector is expected to become the country's largest contributor to GDP  by offering Rs 14 lakh crore and accounting for 8.2 percent of the total gross domestic product by 2020.

The telecom regulator, TRAI, has recommended a 2% reduction in the license fee and universal service obligation fund to rest at 6% and 3% respectively. 

Citing another study conducted by the Cellular OPerators Association of India (COAI), the report further said that a one percent reduction in the spectrum usage charges (SUC) can increase GDP by Rs 1.76 lakh crore.

The Telecommunication Industry is committed to realize the government's vision of Digital India. A quick resolution on issues, facilitating ease in doing business, will accelerate project.

"We are confident that the government, which has set a fast pace of policy and execution, will support this endeavour," said P.Balaji, Chairman Assocham National council on Telecommunications and Director-Regulatory, External Affairs and CSR, Vodafone India.

Telecom industry, due to its dynamic nature, witnesses continuous changes in business and technology environment. In the recent past, India has witnessed a surge in data usage. Mobile data traffic grew by 50% in 2015.

Such tremendous growth is associated with a mature network, device and content eco-system. In the current environment, Telecom Service Providers (TSPs) and Over the-Top (OTT) service providers have leveraged on their synergies to work towards fulfilling the 'Digital India' vision.

OTT service providers are playing a significant role in driving data consumption and transforming consumer behaviour. A major contributor to the increased data traffic is the growing customer demand for video that is expected to experience a further boost with the advent of 4G services.

Telecom service providers make huge investments in deployment of networks as well as in acquisition of spectrum. However, isssues faced in electromagnetic interference result in poor quality of services leading to customer dissatisfaction, losses to the TSPs and the exchequer, despite the huge investments made.

Among the major sources of interference are air-waves from nearby international borders and out-of-band emissions by institutions deploying links in free Wi-Fi band or from illegal repeaters, boosters, jammers.

Non-coordinated use of frequencies is the primary cause of interference from telecom service providers in neighboring countries. Usage of frequencies should be regionally coordinated and globally harmonized to overcome this issue.

There is a need to engage actively with the neighboring countries for specific regions, where the TSPs are facing interference issues. Alternatively, the Department of Telecommunications should allocate the TSPs with spectrum in alternate frequency bands, wherever such issues cannot be resolved with the neighboring countries, noted the study.