Govt considering 8% licence fee on telecom tower firms

The Department of Telecommunications (DoT) plans to levy an annual fee of eight per cent on the revenue of telecom tower companies and bring these entities under the ambit of a licence regime.

A committee set up by DoT expects the move to help the government collect about Rs 2,000 crore of additional revenue in the first year of its imposition and help bridge its fiscal deficit. With the industry growing about 11.4 per cent a year, the government’s mop-up would see a proportionate rise every year.

Currently, tower companies are categorised as infrastructure providers (category-I), which also includes firms providing dark fibres and duct space. For 2010-11, the government pegged the cumulative revenue of major companies in the sector at Rs 23,580 crore.

In the quarter ended September, the government had collected Rs 2,884 crore as licence fee from telecom service providers, about eight per cent of their adjusted gross revenue of about Rs 35,473 crore.

Unlike telecom service providers, tower companies do not pay any licence fee and can start operations with a registration certificate that has a processing fee of only Rs 5,000. However, DoT has said currently, tower providers facing restrictions from different local bodies were subjected to varied local regulation. Bringing them under a licence regime would introduce uniformity and order, it added.

Under the proposed regime, tower companies would be allowed to provide both passive and active infrastructure, independent of the service providers. This would facilitate faster roll-out and reduce capital expenditure of service providers. With about 3,75,000 towers across the country, tower companies have recorded over-capacity. This worsened when the Supreme Court had cancelled many telecom licences, owing to irregularities in the 2G telecom scam. Experts say after the licences were cancelled, the average tenancy rate of tower companies fell from 1.6 to 1.4 per cent.

In November, listed tower company Bharti Infratel, which has about 33,000 towers, said it had a tenancy rate of about 1.9 per cent. The company holds a 42 per cent stake in Indus Towers, which has about 1,10,000 towers in India. Other leading tower companies include GTL, Viom Networks and American Tower Company.

A senior executive of a tower company said, “The government has miscalculated. Most telecom companies have still not transferred their tower assets to infrastructure companies. They have agreements for long-term use of the assets. About 80 per cent of the towers are in this category. So why should they pay licence fee on their own usage of the tower?”

Bringing tower companies under the licence regime would benefit consumers, as it would lead to better services.

Increased infrastructure sharing would also help reduce overall costs of telecom services, said the DoT committee.

“We have always asked the government not to bring the sector under the scheme. The government should not make it mandatory for companies to shift to unified licences. It should be kept optional so that companies willing to scale up can get licences,” said Umang Das, director general, Tower and Infrastructure Providers Association.

Bringing tower companies under the licence regime would benefit consumers, as it would lead to better services. Increased infrastructure sharing would also help reduce overall costs of telecom services, said the DoT committee.