Fixing floor prices critical amid financial stress in telecom: COAI

The association said floor prices need to be fixed for data only for an interim period, say two years, and that voice calls and tariffs can be excluded from this.

Industry body COAI on Tuesday contended that floor price fixation is absolutely critical and need of the hour, given the "major financial stress" in the telecom industry.

The association -- whose members include Bharti Airtel, Reliance Jio and Vodafone Idea -- said floor prices need to be fixed for data only for an interim period, say two years, and that voice calls and tariffs can be excluded from this.

"In the last few years, fixation of floor prices has become a critical issue and is need of the hour today with telecom industry going through major financial stress," S P Kochhar, director-general of Cellular Operators' Association of India (COAI), said in a statement.

Despite the financial constraints faced by them during the pandemic, the telecom service providers continued to plough in significant investments and provide seamless network connectivity to Indians, COAI argued.

"It is important to understand that the telcos have incurred losses because of the downward pricing trend of data tariffs. Revenue generation is now essential to sustain their financial health," Kochhar added.

The association said it has made regular pleas for setting the floor prices, and noted that the Telecom Regulatory Authority of India (Trai) had also done a consultation with COAI over the issue.

"Floor prices must be fixed to provide some relief from the immense cost burden. Floor prices should be fixed for data only for an interim period, say two years, and voice calls/ tariffs can be excluded from this," said the association said.

Bharti Airtel Chairman Sunil Mittal has said that the industry's tariffs need to go up amid "tremendous stress" in the telecom sector.

"To say telecom industry is in a bit of trouble is actually an understatement. It is in a tremendous amount of stress.

"I hope the government, the authorities, and telecom department...all...focus on this issue and ensure India's digital dream remains intact through the provision of at least three operators," Mittal had said recently.

The top boss of Bharti Group had emphasised that market repair must take place.

The industry stress is perhaps most visible on cash-strapped Vodafone Idea.

Aditya Birla group Chairman Kumar Mangalam Birla had, in June this year, offered to hand over the Group's stake in debt-laden Vodafone Idea Ltd (VIL) to the government or any other entity that the government may consider worthy, to keep the company afloat.

In a letter to Cabinet Secretary Rajiv Gauba on June 7, Birla had said investors are not willing to invest in the company in the absence of clarity on AGR (statutory dues) liability, adequate moratorium on spectrum payments and "most importantly floor pricing regime above the cost of service".

Without immediate active support from the government on the three issues by July, the financial situation of VIL will come to an "irretrievable point of collapse", Birla had said.

VIL had an adjusted gross revenue (AGR) liability of Rs 58,254 crore; out of which, the company has paid Rs 7,854.37 crore and Rs 50,399.63 crore is outstanding.

The recent dismissal of telcos' plea by the Supreme Court on re-computation of AGR-related dues has made matters worse for Vodafone Idea, whose balance sheet situation is 'precarious', analysts have said.