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As Per Latest Information Telcos Urge Government to Reduce Levies for 5G Viability: Report

Telecom companies seek 1% reduction in license fee for 5G rollout.

Top Indian telecom firms including Bharti Airtel, Reliance Jio, and Vodafone Idea have pleaded with the government to lower taxes so they may invest in 5G rollouts. The telcos have asked for a 3% licence fee cut to 1% and a postponement of the 5% USO levy until the Rs 64,774 crore fund is depleted.

HIGHLIGHTS

  • India’s top telecom companies are investing in 5G rollout.
  • Bharti Airtel, Reliance Jio, and Vodafone Idea urge the government to reduce levies.
  • They requested a reduction in the license fee from 3% to 1%.

Bharti Airtel, Reliance Jio, and Vodafone Idea, three Indian telecommunications companies, have requested that levies be cut. The telecoms claim to be making significant investments in the quickest 5G rollout in the world, but they lack a clear picture of the increased revenue from the next-generation services. Through the Cellular Operators Association of India (COAI), the telcos have requested a reduction in the license fee from 3% to 1% and a deferral of the 5% USO (universal service obligation) levy until the Rs 64,774 crore lying in the fund is exhausted, according to a report by ET Telecom.

Financial Relief Needed

The newspaper cited COAI director general SP Kochhar as saying, “5G is being deployed quickly 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 realized.”

Kochhar emphasized the need for financial relaxation and support for India’s debt-laden telecom sector, despite its massive investments in achieving the world’s fastest 5G rollout.

5G Rollouts in India

Bharti Airtel and Reliance Jio have now reached over 500 and 400 cities, respectively, as they roll out 5G services across the nation. However, K M Birla said that there is no set timeframe for when Vodafone Idea would begin bringing out 5G.

Tariff Hikes

Only Bharti Airtel has drastically increased the pricing, in spite of its financial difficulties and sustainability. While BSNL occasionally updates the advantages of packs and plans to reflect price increases, struggling telecom Vodafone Idea continues to inadvertently lower prices to attract users, and Reliance Jio avoids mentioning price increases outright. However, Jio has increased the prices of its entry-level postpaid services.

According to a forecast by ICICI Securities, Jio and Airtel would invest respectively Rs 66,600 crore and Rs 94,000 crore over the next five years expanding their 5G coverage. The long-term growth narrative of Bharti Airtel, on the other hand, is still intact, according to a MOFSL analysis, since the telco has already hiked rates and anticipates monetization prospects in the INR 2.2 trillion Indian telecom market.

One of the industries with the highest taxes in the world is telecom in India. After adding income tax, regulatory levies and taxes contribute for 35% to 38% of total revenues, or around 30% of total revenues.

No Commercial 5G Use cases.

Customers do not currently have a financially viable use case for 5G other than running speed testing and publicizing the results. Telcos now lack a defined 5G use case that will enable them to generate revenue. 5G, nevertheless, may be important for enterprise services.

Return on Capital is very Less.

Gopal Vittal, CEO of Bharti Airtel, believes the telecom industry’s financial viability needs improvement, as it currently offers less than 8% return on capital compared to banks.

Industry executives also say there is a lack of monetization opportunities and use cases for 5G as of now.

What do you think?

Written by Shallu Srivastav

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