Telcos may sidestep RJio issue to raise legacy ones in talks

The telecom industry that looks headed the steel industry way due to its huge debt and falling revenues is expecting resolution of some of its issues and respite from heavy levies post the meeting of telecom minister with mobile company promoters slated in the third week of June.

Many do not rule out the fierce war being fought in the market between the incumbent telecom players and new entrant Reliance Jio Infocomm Ltd (RJio) to spill over to the one-on-one interactions called by the telecom minister Manoj Sinha.

Prior to the minister's meeting, the inter-ministerial group (IMG), comprising officials from ministries of communications and finance, is set to meet telecom operators this week.

The first of these meetings will kick off on Monday, with the group slated to meet senior executives from Reliance Jio, Reliance Communications, Tata Teleservices and Aircel, reported PTI, quoting sources. Over the course of the week, the IMG will also meet other operators including Bharti Airtel, Vodafone and Idea Cellular, as well as top officials of telecom PSUs Bharat Sanchar Nigam and Mahanagar Telephone Nigam.

On June 15, the Telecom Regulatory Authority of India (Trai) too is scheduled to meet the operators to discuss their problems and seek views on a policy prescription.

These talks will set the tone for relief measures that could be in the offing, after their final meeting with the minister.

Rajan Mathews, director general of Cellular Operators Association of India (COAI), said the RJio matter may crop up in the context of "regulatory oversight" and what was causing the current telecom crisis.

"I don't know whether individual operators will directly raise that (RJio issue). If at all, it may come up in the context of what is causing this (telecom crisis) and regulatory oversight," said the chief of the lobby body of GSM operators.

Incumbent players – Bharti Airtel, Vodafone and Idea – have, time and again, accused Trai of favouring the Mukesh Ambani-owned RJio and overlooking violation of regulatory norms by it. RCom, owned by Anil Ambani and which is on the verge of default, may be tilted to the incumbents due to its compulsion to survive.

Mathews, however, expects telecom company (telco) owners' discussions with the minister to largely centre around issues related to operational, financial, ease of doing business and general of health of the sector.

"Principally, he (Sinha) wants to find out from the operators' the issues that are disrupting them – financial issues, operational issues, ease of doing business. He wants to hear how he can get the industry back on its feet," he said.

Mathews believes that one cannot link everything going wrong in the sector to RJio's entry as there were many problems plaguing it even before the latest entrant stepped into the market.

For instance, he was expecting the long standing demand for redefinition of the adjusted gross revenue (AGR) to be sorted out. The way the AGR has been defined today has led to many litigations. The COAI has also asked for rationalisation of licence fee from the current 8% of AGR to 3% and spectrum usage charges (SUC) from the existing 3% to 1% of the AGR.

According to him, what would provide a major relief to the telcos would be the extension of moratorium in the payment schedule, provided by the government for the spectrum acquired in the auction, from two years to five years and payment for the spectrum over its life as opposed to the current 10 years.

The total debt of telecom firms is over Rs 4 lakh crore, which way above their turnover of around Rs 2 lakh crore.

A telecom expert and a former senior executive of a leading telco, who sees the RJio foray as an important turning point in the telecom sector because it sparked off consolidation, crashed data tariffs and brought India's broadband on the global radar, said the meaningful intervention by the recently set up IMG and the minister would help drive the industry to a financially healthy future.

"I'm very clear you can't fault what Jio is doing. It is benefiting the public with tripled data usage and crashed tariffs. India's position, which was not visible in broadband, has jumped up many ranks. It also started the consolidation process in the sector. All that is happening is good for the economy, industry and customers in the long run," he said.

T V Ramachandran, president Broadband India Forum (BIF), said the fundamental problem of the sector was high licence fee and SUC, which he said should be snipped to 2%-3% collectively to bring it closer to the global benchmark.

"The total of these two (licence fee and SUC) should be 2% or 3% of AGR. There is no basis for charging a high SUC or license fee on AGR. If that is done the sector will become healthier," he said.

Ramachandran said SUC in China was as low as 0.1%. "The principle behind it is that licence fee and SUC should be just enough to cover the cost of administration and regulation, and that is normally a fraction of a percentage," he said.

He feels with the increase in taxes due to a higher goods and services tax (GST) rate fixed by the GST Council, a cut in licence fee and SUC had become even more imperative.

According to him, once the actions of consolidation – merger between Vodafone and Idea, RCom and Aircel and Airtel and Telenor – is followed through the sector awaited a brighter future.

Another executive of a leading telecom firm who did not want to be named said, "The current environment in the telecom sector was brought on by the actions of only two people in the entire ecosystem -- one, a new operator and two, the regulator -- and everybody has been negatively impacted. This needed government's urgent attention."

...& ANALYSIS

• Incumbent players have, time and again, accused the telecom regulator of favouring RJio and overlooking violation of norms
   
• Reliance Communications, which is on the verge of default, may be tilted to the incumbents due to its compulsion to survive