Indian Telcos Not Going to be Relieved from 8% LF

The government is unlikely to include the reduction of LF for the telecom sector in the upcoming budget. According to a Financial Express report, a senior government official aware of the matter said that the telcos have already been given a lot of relief, and thus the reduction in LF is not something that's going to happen anytime soon.

Highlights

  • Indian telecom operators in India are likely not going to be relieved from the 8% license fee (LF) that they have to pay every quarter of their adjusted gross revenue (AGR).
  • The government recently redefined the AGR and excluded non-telecom revenues along with landline revenues to aid the telcos.
  • The government is unlikely to include the reduction of LF for the telecom sector in the upcoming budget.

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Indian Telcos

Indian telecom operators in India are likely not going to be relieved from the 8% license fee (LF) that they have to pay every quarter of their adjusted gross revenue (AGR). The government recently redefined the AGR and excluded non-telecom revenues along with landline revenues to aid the telcos. However, the industry has been batting for a reduction in the overall LF from 8% to 1%. For the unaware, the 8% LF comprises a 5% contribution to the universal service obligation fund (USOF). The telcos want the 5% USOF contribution to be scrapped and then the remaining 3% LF to be cut down to 1%. While it would help the sector majorly, that would mean lower revenues for the central government from the telecom sector.

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The government is unlikely to include the reduction of LF for the telecom sector in the upcoming budget. According to a Financial Express report, a senior government official aware of the matter said that the telcos have already been given a lot of relief, and thus the reduction in LF is not something that's going to happen anytime soon.

Back in September 2021, the government came out with relief measures for the private telcos. In addition, a revival package worth Rs 1.64 lakh crore was also announced for BSNL (Bharat Sanchar Nigam Limited) back in 2022. The government believes that it has done its part for the moment in helping the sector, and that means the telcos would have to continue paying 8% LF out of their AGR.

However, in hindsight, the telcos would be in a much better position if the LF is cut down to 1%. The capex on networks is rising because of 5G investments, and there's also not going to be any major RoI (return on investment) on the 5G rollout anytime soon. Thus, the telcos would need more cash in their hands to ensure that proper 4G expansion keeps taking place along with the 5G rollout.

Reported By

Tanuja is a passionate technology and telecom buff who has been following the telecom industry for several years now.

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