Reliance Jio, Bharti Airtel and Vodafone Idea (Vi), three prominent telecom operators in India, do not need to worry about higher license fees. Currently, the telcos have to pay out 8% of their adjusted gross revenue (AGR) as license fee. The parliament has been informed by the Minister of State (MoS) for communications, Devusinh Chauhan, that the Telecom Regulatory Authority of India (TRAI) isn’t thinking about raising the revenue sharing rate payment the telecom service providers (TSPs), said a Business Standard report.
The current 8% license fee includes a 5% contribution to the USOF (Universal Service Obligation Fund), and the remaining 3% is purely license fee. TRAI doesn’t have any proposal to hike this fee in the near future, the minister said.
Telcos are Asking for a Cut in License Fee (LF)
All the private telcos are already unhappy with the LF they need to pay. They have been requesting the government to reduce it. If the LF is increased, it would hurt the cash flow of the telcos and would contribute to liquidity problems.
Just because the telecom sector is the digital lifeline and backbone for a developing country such as India, the telcos having less money for capex would be a detrimental thing for the growth. While a higher percentage of LF does help the government earn more revenues which can be then put into good use for the country, there needs to be a balance.
If the telcos are requesting a cut in the LF, it means that the current rate is also too much to pay for them. At a time such as this, the government must be at the side of the operators and not hike the rates, at least if it is not reducing them. Well, the good thing, for now, is the government isn’t looking to increase LF for the operators, which would help the telcos is pushing more money towards networks and services.