5G rollout: Citing economic viability, telcos seek tax cuts from govt

Reliance Jio, Bharti Airtel, and Vodafone Idea have made contacts with the government seeking sharp cuts in levies, The Economic Times (ET) has reported.

The telecom companies have cited the limited demand for 5G services. Moreover, they have argued that they are investing substantial amounts of money to ensure the fastest 5G rollout in the world and want government support.

The top telecom companies, represented by the Cellular Operators Association of India (COAI) want the license fee to be brought down to 1 per cent from 3 per cent. Additionally, they want the universal service obligation (USO) of 5 per cent deferred till the Rs 64,774 crore lying in the fund are exhausted, the report said.

Data released by Icra shows that the telecom industry is expected to have closed the financial year 2022-23 with a debt of around Rs 6.3 trillion.

Director general of COAI, SP Kochhar told the newspaper, “5G is being deployed rapidly across the country, but revenues can be gained from the same only once the market matures, use cases are established and the enterprise uptake of the services is realised.”

He added, “While the debt-laden telecom sector has put in massive investments and efforts to ensure India gets the world’s fastest 5G rollout, it also needs more financial relaxation and support for viability and sustenance.”

Jio, Airtel, and VI

Reliance Jio and Bharti Airtel are going neck-to-neck in rolling out 5G services. Currently, they offer 5G services in around 500 cities and towns in the country.

Reportedly, last year, Jio was the biggest spender on the 5G spectrum. It bought airwaves worth Rs 88,078 crores. On the other hand, its rival Bharti Airtel acquired spectrum worth Rs 43,084 crore.

Vodafone Idea lags behind in its 5G offerings. It acquired 5G spectrum last year and spent Rs 18,799 crores for the same, however, it is yet to announce its 5G rollout plans.

High taxes in the country

An expert at EY quoted in the report said, "There is an urgent need to rationalise the levies in light of the investments needed in the sector for 5G rollout, including fiber rollouts and home broadband."

He added that the Indian telecom sector is one of the highest-taxed telecom industries globally and the taxes need to be rationalised. He said, currently the levies and taxes stand at 30 per cent of the revenues. Once the income tax is added, levies and taxes account for 35 to 38 per cent of the total revenue.

Economic viability

Experts said that there is a dearth of monetisation opportunities and use cases of 5G at this point. With a robust 4G infrastructure in place, it is difficult for telecom companies to charge a premium from the customers for using 5G services.