India telcos Bharti Airtel, Reliance Jio and Vodafone Idea have urged the government to reduce levies. The telcos say they are investing heavily in the fastest 5G rollout in the world but have no clear visibility regarding the additional revenue from the next-gen services. Through the Cellular Operators Association of India (COAI), the telcos have requested a reduction in the license fee from 3% to 1% and a deferral of the 5% USO (universal service obligation) levy until the Rs 64,774 crore lying in the fund is exhausted, according to a report by ET Telecom.
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Financial Relief Needed
"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 realized," the report quoted COAI director general SP Kochhar.
"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," Kochhar added.
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5G Rollouts in India
Bharti Airtel and Reliance Jio are rolling out 5G services across the country and have already covered over 500 and 400 cities, respectively. On the other hand, K M Birla remained that Vodafone Idea will soon start rolling out 5G, but have no definite date of the same.
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Tariff Hikes
Despite the financial woes and viability, only Bharti Airtel has significantly raised the tariffs. While BSNL revises the benefits of packs and plans now and then, such as to reflect hike, the struggling telco Vodafone Idea still reduces tariffs indirectly to lure customers, and Reliance Jio shies from taking the reference to the word hike itself. However, Jio has hiked the entry-level plans in the postpaid segment recently.
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An ICICI Securities report expects Jio and Airtel to spend around Rs 94,000 crore and Rs 66,600 crore for 5G coverage in the next five years. On the other hand, a MOFSL report said Bharti Airtel's Long term growth story remains intact as the telco has already increased tariffs and expects monetization opportunities in the INR 2.2 trillion Indian telecom sector.
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The Indian telecom sector is one of the highest taxed globally. The regulatory levies and taxes are approximately 30% of the revenues and, after adding income tax, account for 35% to 38% of the revenue.
No Commercial 5G Use cases
So far, apart from performing speed tests and posting results, customers do not have a 5G-specific use case that is commercially relevant. So, telcos have no specific 5G use case as of now that can help them make money. However, 5G can be relevant for Enterprise services.
Return on Capital is very Less
"A bank today gives you a 7-8% return on Capital. In the telecom industry, it is less than 8%. I would much rather put the money into a bank deposit and have the same return without taking all this risk. So, the financial viability of the industry needs to improve," the report quoted Gopal Vittal, CEO of Bharti Airtel.
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Industry executives also say there is a lack of monetization opportunities and use cases for 5G as of now.
