Debt burden mounts as telecom operators get into price war, says ASSOCHAM-KPMG study

New Delhi [India], Sep 28 : Even as the telecom industry finds itself in a tariff war with entry of a major player, an ASSOCHAM-KPMG paper has pointed towards the operators grappling with a huge debt burden of Rs.

3.80 lakh crore, reinforcing a case for rationalization of taxes and other levies along with spectrum charges.

The telecom operators have an accumulated debt of around Rs. 3.8 lakh crore. An additional customs duty of 10 percent will lead to an increase in cumulated duty to 29.44 percent, reveals the joint study.

"Even though consumers are having a last laugh with competitive offers from the 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 rationalization of tax regime will provide required financial stability to Indian telecom industry.

Presently, multiple charges and taxes are levied on the sector in addition to the charges paid by other industries (such as corporate tax, VAT, etc.).

Spectrum Usage Charges (SUC) in India are comparatively higher than other economies, noted ASSOCHAM-KPMG joint study.

Telecom sector is expected to contribute 8.2 percent or Rs. 14 lakh crore to the GDP by 2020 and one of the highest contributors to the GDP over the last decade, adds the study.

Industry expects that there is a no rationalization of multiple levies imposed. TRAI has recommended that license fee should be reduced to six percent and Universal Service Obligation Fund to three percent from current levels of eight percent and five percent respectively.

Further, as per a study cited by COAI, reduction in Spectrum Usage Charges (SUC) by one percent can increase GDP by Rs.

1.76 lakh crore, highlighted the study. The Telecommunication Industry is committed to realize the government vision of Digital India. A quick resolution on issues that will facilitate ease of doing business will accelerate the same. "We are confident that the government which has set a fast pace of policy and execution will support this endeavour," said Chairman ASSOCHAM National council on Telecommunications and Director-Regulatory, External Affairs and CSR, Vodafone India, P.Balaji.

Telecom industry, due to its dynamic nature, witnesses continuous changing business and technology environment.

In the recent past, India has witnessed a surge in data usage. Mobile data traffic grew by 50 percent in 2015. Such tremendous growth is associated with 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 which 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, electromagnetic interference issues faced result in poor quality of services to the subscribers, customer dissatisfaction, losses to the TSPs and the exchequer at large, in spite of 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 DoT should allocate the TSPs with spectrum in alternate frequency bands, wherever such issues cannot be resolved with the neighboring countries, noted the study.

Source: ANI