New Delhi: A year-and-a-half after the government extended a lifeline for the cash-strapped telecom sector that includes a wide set of measures, such as granting a four-year moratorium on unpaid dues, Cellular Operators Association of India (COAI) believes that the financial woes of the sector are far from over.
According to S.P. Kochhar, Director General, COAI, the industry needs more government support, including a reduction of taxes and levies, to prosper. “You have to see, this (industry’s financial health) in the context not only of the packages, but also what happened subsequently. There has been a huge amount of investment in 5G and the rollout is happening without change in tariffs,” Kochhar told ThePrint in an interview.
This, he explained, meant that there was an outflow, but hardly any change in inflow of collections. “Therefore, to say that the sector’s financial health has improved would be an understatement,” Kochhar said.
While he acknowledged that the government has given some relief to the sector, particularly in ease of doing business, Kochhar added that “there is still a long way to go”.
He pointed out that the average revenue per user (ARPU) for telcos has not increased the way it should have for a “healthy industry”.
ARPU or average revenue per user is a metric used to gauge monetisation of the subscriber base. It is a key indicator of financial health of a telco to track growth and profitability.
According to reports, currently, Bharti Airtel has the best ARPU of the three private players in the market at Rs 193 in the October-December 2022 quarter. However, it is still significantly lower than an ARPU of Rs 300, which the company has stressed is essential for reasonable returns on capital employed.
For Reliance Jio, the ARPU during the October-December quarter stood at Rs 178, while for Vodafone Idea it stood at Rs 135.
Kochhar, pointed out that ARPUs haven’t gone up the way they should have and suggested that the government will have to chip in to help the industry grow.
“We are right now at the foundation-building stage. The businesses will then ride on telecom infrastructure…the other businesses, including telcos themselves, will prosper. And with this prosperity will come additional revenue to the government, through taxes and tariffs, out of those lines of business,” he said.
On the industry’s demands from the government, Kochhar said there are still levies and cost of spectrum that the government needs to review.
“The government has given us some relief in the spectrum pricing and ease of doing business. The bureaucratic tangles have been removed, and most of the policy letters that come out now are very clear and unambiguous…” Kochhar said.
According to him, the sector requires more financial support from the government. “Taxes and levies should be reduced, we are insisting that the spectrum prices should be brought down much more,” he said.
The problem, he added, is that up to the 4G era, the telecom sector was seen as a goose laying golden eggs because whatever revenues could be extracted out of telecom, were being extracted.
“The telecom infrastructure is now a national building block. The government and the regulators have also realised that…We are not decrying that the government is not doing anything. It is doing a lot, but there is a lot more to be done,” he added.
(Edited by Richa Mishra)
Also Read: Why 5G phones are still priced too high for most Indians — ‘Democratisation yet to happen’
Source: The Print
