COAI suggests slashing levies, reviewing reserve prices ahead of 5G rollout

COAI recommended that the new government should slash levies to an ideal 4-5 %

The new government should take urgent steps to ease the financial burden on the stressed telecom sector, slash overall levies to an ideal 4-5 per cent and review spectrum prices to make it affordable ahead of the crucial 5G rollout, industry body Cellular Operators' Association of India (COAI) said.

Prime Minister Narendra Modi has led Bharatiya Janata Party (BJP) to a landslide victory for a second term in office, while the Congress suffered a serious setback in the Lok Sabha polls.

The new government, which is set to be formed in the next few days, will present the full Budget for 2019-20, and the mobile operators' association is hoping that some of its long-pending demands will be taken up in the coming months.

Topping its wishlist is cut in levies, as the industry hopes that the current level of 30 per cent levy would be reduced to provide a breather to the stressed sector.

"Charges like Licence Fee, Spectrum Usage Charges and redefinition of Adjusted Gross Revenue (AGR) needs to be looked at," COAI Director General Rajan Mathews told PTI.

Asked what the association considers to be an ideal level, Mathews said globally levies do not exceed 5 per cent and hence 4-5 per cent would be "ideal".

On the issue of debt restructuring, Mathews said telecom operators should be given more time for repayment of spectrum bought in auctions. This, he said, can be done by increasing the moratorium period to four years and payment period to 18 years keeping the 'Net Present Value' unchanged.

The industry also wants the government to look at making spectrum prices "more affordable".

"If we want 5G to take off, the present pricing will not get you there," Mathews added.

He noted that at the present prices proposed, operators will not be able to afford the radiowaves which, in turn, will pose a challenge in rollout of 5G services.

A section of the industry has questioned regulator Telecom Regulatory Authority of India's (TRAI) methodology of computing the reserve price, claiming it has resulted in spectrum prices being unreasonably higher than global benchmarks.

Earlier this year, Bharti Airtel Chairman Sunil Mittal too had flagged high reserve prices of 5G spectrum. He had said the government must price spectrum reasonably and lower various levies to encourage rollout of 5G services in the country at the earliest.

The telecom czar had also warned that the spectrum auction may fail and Airtel might not bid for airwaves if the auctions are held at prices recommended by TRAI.

The TRAI has recommended auction of about 8,644 MHz of telecom frequencies, including those for 5G services, at an estimated total base price of Rs 4.9 trillion.

The telecom sector is burdened with staggering debt levels and cut throat competition.

Competition has only intensified since 2016, when Reliance Jio, owned by Mukesh Ambani, stormed into the market and offered lifetime free calls and dirt cheap data. Jio's disruptive offerings forced rivals to slash rates, affecting profit margins. Since Jio's launch, rivals have either merged, resorted to acquisitions or folded up.