Government of India can reduce license fee of telecom companies from 8 percent to 5 or 6 percent. This will be the second major relief for these companies, which are troubled by heavy debt, saving their crores will be possible. The price war started in the industry after Reliance Jio Infocomm entered the market in September 2016, which has led to a decline in the earnings and margins of the old telecom companies.
Considering reducing license fees
Two top government officials said that there would be a high-level meeting in the government this week. It may consider reducing license fees. Those who know the industry say that this will save Rs 4,000-5,000 crore every year to the three telecom companies, but this will not reduce the pressure from the balance sheets of Vodafone Idea and Bharti Airtel, which the DoT has to pay Rs 53,000 and Rs 35,500 crore respectively. Have to pay. The recent Supreme Court ruling broadened the definition of Adjusted Gross Revenue (AGR) to account for this liability.
'Government can't do anything on AGR dues' The top government official said on condition of anonymity, 'The government cannot do anything on the AGR dues because the Supreme Court has taken this decision. The Center first granted companies a two-year moratorium on payment of spectrum dues and now a reduction in license fees will be looked into. Another source aware of the matter said that once the decision is made, it will then be sent to the cabinet for approval.
Spectrum payment recommendation already approved The committee of secretaries submitted the report last month to suggest measures to improve the financial health of the telecom sector. It had suggested a reduction in license fees with a two-year exemption from spectrum payments. The Cabinet has already approved the recommendation regarding spectrum payment. This has given cash flow relief of Rs 42,000 crore to all the three private sector telecom companies. Now a cut in license fees is being considered.
How much can the license fee be? Telecom companies pay 8 percent of their AGR license fees to the government every year. The industry has long been demanding to reduce it. It also wants a reduction in spectrum usage charge (SUC), which is 3-5 per cent of the AGR. "The portion of the license fee that goes to the Universal Service Obligation Fund (USOF) can be reduced from 5 percent to 3 or 4 percent, although the net license fee can be reduced from 3 to 2 percent," said an official.
How much will Airtel, Voda save? Analysts said that if the license fee is reduced to 5 percent, then in FY 2021, Bharti Airtel will save Rs 2,000 crore, Jio 1,500 crore and Vodafone Idea will save about 800 crore.
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