Notices to telcos likely this month: AGR dues may rise 10%, delay spectrum sale

Source: The Economic Times, Nov 08, 2019

NEW DELHI | MUMBAI: India’s mobile phone companies may be liable to pay around 10% more in dues to the government than previously estimated, following the Supreme Court verdict on adjusted gross revenue (AGR), said government officials with knowledge of the matter. The total dues, pegged at Rs 1.3 lakh crore by the telecom department, could rise further on account of changes to the definition of AGR and the levies having to be calculated for the entire period till date.

20191108-2That could delay auctions of spectrum even further, considering the precarious financial situation of the sector, people familiar with the matter said, perhaps until late next year. The sale of airwaves, including 5G spectrum, will be conducted this financial year, the government had said earlier. This timeline may be reconsidered, said people with knowledge of the matter.

DoT is recalculating the dues that telcos owe to the government as per the Supreme Court order, which has clarified that all revenue accrued to the licence holder will have to be included while arriving at gross revenue. As per this definition, “the licence fee and spectrum usage charges could rise by 10%,” one of the officials said. This will result in a proportionate rise in the dues of each telco, the official added.

Spectrum Sale unlikely in FY20
The Supreme Court order of October 24 meant that the telcos faced licence fee demands of nearly Rs 92,642 crore, including penalties and interest, as per DoT’s submissions in court in mid-July. Spectrum usage charge (SUC) demands totalled nearly Rs 41,000 crore, also including interest and penalties. The Supreme Court has given a three-month deadline for the payments to be made.

Vodafone Idea and Bharti Airtel are the worst hit, facing demands of more than Rs 39,000 crore and Rs 41,000 crore, respectively, in licence fees and SUC. A10% increase could potentially see this rising to Rs 42,900 crore and Rs 45,100 crore, respectively. Reliance Communications, undergoing bankruptcy resolution, faces a demand of Rs 20,000 crore. Tata Teleservices, which has sold its consumer mobility business to Bharti Airtel, owes Rs 13,000 crore to the government. Reliance Jio Infocomm, which launched services in September 2016, owes around Rs 41 crore.

Read the rest of this entry »

Fewer levies, cheaper spectrum may help untangle telecom mess

Source: LiveMint.com, Nov 06, 2019

NEW DELHI : India’s telecom sector needs a fresh impetus, ranging from cutting the plethora of levies the sector is burdened with, to lowering the reserve price for spectrum in forthcoming auctions, according to experts.20191106-3

“Rather than taxing the performance of the operators at a fixed rate in perpetuity, the government should look at a variable rate which would leave more investible surplus in the hands of the operators. This will cut borrowings, save interest costs, resulting in some sort of revenue-neutral rate which could be indexed to inflation with another 1% for exigencies,” said B.K. Syngal, senior principal at Delhi-based Dua Consulting.

The government has generated lower revenue from telecom in each of the past three years. It got a total of ₹12,100 crore as licence fee and spectrum charges in the year ended 31 March, a 13% decline from ₹13,700 crore it received in the previous year. It had collected ₹18,400 crore in FY17.

Telecom services currently attract a goods and services tax of 18%. Companies also pay a licence fee of 8% and spectrum user charges of 3-5%, besides paying corporate tax.

To tide over the immediate crisis, Syngal suggests waiving interest charges from the ₹92,000 crore in dues that the Supreme Court has directed telecom companies to pay in the adjusted gross revenue (AGR) case two weeks ago. Syngal said companies should be allowed to pay only the principal amount.

Jaideep Ghosh, partner at KPMG, suggests that telecom companies should be allowed to make the payments later.

Industry stakeholders are also worried about the impact the current crisis could have on the proposed auction of 5G spectrum. The companies are already burdened with massive debt.

At the end of March 2019, Bharti Airtel, the ‘healthiest’ of the remaining legacy operators, had a net debt of ₹1.08 trillion. The company’s annualized FY20 revenue is seen 22.5% lower from 2015-16. Vodafone Idea is expected to fare worse, with revenue likely to decline by 43.4% during the same period.

“5G isn’t an extension of 4G. It’s a different ecosystem altogether. China has already raced ahead in 5G. The government could look at incentivizing users. This will help its Digital India goals as well as improve the health of the companies,” said Harsh Gupta, chief investment officer at Ashika Group, a financial services firm

Gupta suggests a monthly ₹30 ‘Digital Literacy Voucher’ for every mobile user for a year.

“You have JAM (Jan Dhan-Aadhar-Mobile) in place. Every mobile user could be given `30 as a monthly recharge with any telecom service provider. That will improve the ARPUs too,” he said. ARPUs in India are currently the lowest in the world, ranging between ₹110 and ₹130 per month for the companies, a clear reflection of the intense competition in the sector.

The industry has for long complained that governments, short of options to raise revenues to finance their social welfare schemes, have used it as a cash cow to make up for their deficits. Their grouse has been that governments haven’t looked at the sector in a holistic manner.

“Many of the problems would be solved if it looked at it holistically and not just as a telecom services provider. All telecom operators are now enablers of digital literacy in some way.

They are content providers. What impacts telecom companies also impacts network element providers, logistics providers, tower companies and so on,” KPMG’s Ghosh said.

He is also not against the idea of deferring the spectrum auction but cautions it shouldn’t be for too long. Ghosh said the auction could be deferred by a few months but added a caveat:

“China has moved ahead in 5G. It would not be prudent to delay it for too long,” he said.

Syngal favours redefining the concept of AGR which currently also includes dividend income, interest and revenues from sale of handsets bundled with services. “The current definition leaves a lot of grey area on what comprises telecom services. A revenue neutral mechanism will eliminate that ambiguity,” he said.

Refurbished smartphone market enjoys a boost this festive season

Source: ETRetail.com, Oct 09, 2019

Chennai: As smartphones emerge as the flavour of this festive season, more refurbished phones are hitting the market through the exchange offers run by Flipkart and Amazon in parallel to their flagship sales.

Thanks to these exchange schemes, more number of used phones are coming into the system, and are being bought by refurbished phone companies such as Cashify, Budli, and others.

An estimate from tech consulting firm techaARC finds that in 2019, the contribution of refurbished phones is 8.1% of the total smartphone sales compared to 7.3% in 2018.

“Around 20%-25% of smartphone purchases on e-commerce platforms used to happen through exchange offers, and this festive season this ratio is definitely much higher given the upgrade mindset of consumers,” Faisal Kawoosa, founder and analyst, techARC, said.

Walmart-owned Flipkart told TOI that their flagship Big Billion Days sale 2019 saw a 2.5X increase in adoption of product exchange in mobile phone purchases. “The Complete Mobile Protection scheme, which includes our buyback guarantee of 40% exchange value, has witnessed an exponential growth, wherein we sold 2X the monthly average in just the first two days of our sale,” Aditya Soni, senior director — Mobiles, Flipkart, said.

Globally, India continues to see the highest year-on-year (y-o-y) growth in consumption of secondary market devices, as per Counterpoint Research. The report adds that despite a global drop in sale of secondary market devices, India is seeing a 9% growth.

Refurbished and used products platform Cashify has seen a 150% growth in numbers starting September 29 (coinciding with the sale season). “The buyback via e-commerce sites during the festive season sales is 10x the normal daily buyback volume.We have partnered with Flipkart, Amazon, Paytm Mall, Mi.com.

Refurbished phones, that are available at 25% to 45% discount to new devices, are seeing a 15% month-on-month growth,” said Mandeep Manocha, co-founder and CEO, Cashify. Rohit Pagaria of Budli.in adds this festive season has brought a 20%-25% jump in arrival of used phones this year.

“While the phones from the e-commerce platforms are yet to come in, since the sale season is just done, individuals are selling their used phones on our platform to plan for new purchases,” he added.

Discount curbs, loss of exclusivity to hit online smartphone sales


Source: ETRetail.com, Feb 12, 2019

Online sales of smartphones are expected to fall sharply in the January-March quarter after restrictions on discounts, among other curbs, kicked in on February 1, leading handset companies to increase their focus on forming more tie-ups with brick-and-mortar stores.


The share of online smartphone sales may drop to 26-27% in the current quarter as norms prescribed in the rules on foreign direct investment in ecommerce take effect, according to research firms IDC and Counterpoint Technology Market Research.

“There is already an impact…Typically, e-commerce contribution goes as high as 38-40% (of overall sales which includes offline) during the festive season, but in Q1-Q2, it hovers around 30-31%. This time, it might fall by up to 4% because of the policy change,” said Tarun Pathak, associate director at Counterpoint. Pathak said the FDI rules will impact model exclusivity for brands on online channels. “…a lot of companies have agreements in place. This can also delay time-to-market,” he said.

The hit won’t only be on account of exclusive sales, but also due to offers and discounts, which are barred, said Faisal Kawoosa, founder and chief analyst at TechArc. “We estimate that around 35% of online sales are triggered due to offers/promotions and discounts,” he said. The most hurt would be vendors of Honor, Asus and Realme, which are online-only or online-heavy brands, said Prabhu Ram, head, industry intelligence group at market research firm CyberMedia Research. These companies have now started forming partnerships with stores such as Reliance Digital and Croma.

Realme started its offline journey with 10 cities across the country in January and will add 50 cities every quarter. It intends to establish 20,000 outlets throughout the country, the company said in a statement. According to Navkendar Singh, associate research director with client devices at IDC, handset makers will face challenges in offline channels over the next six months because it’s difficult to spread wide and deep very quickly. “To manage operations, brands need a different mindset, different teams because that’s a kind of different animal,” Singh said.

However, even after the expected decline in Q1, etailers will remain sales drivers in 2019, said Upasana Joshi, associate research manager, client devices, IDC India. She said Flipkart and Amazon are finding ways to adhere to the policy. Singh said large format retailers such as Reliance Digital and Croma are in a better position now as they can command better margins from handset companies seeking to form new partnerships.

DoT panel undecided on spectrum allocation to mobile operators

Source: Business Standard, Feb 12, 2019

New Delhi: The Department of Telecom (DoT) is divided over the allocation of backhaul airwaves to mobile operators, with half of them backing the auction route for selling microwave spectrum and the remaining half sticking to the current practice of allotment on a first-cum-first-served basis.

The latter is international practice. According to at least two persons privy to the development, an internal panel of the DoT that is working on a policy of allotting backbone airwaves has not been able to decide on the matter due to differing views of the members.

Microwave access, or MWA spectrum, is allocated to telecom operators for short distances to provide mobile services.

If the logjam on policy persists, it may have an impact on proposed spectrum auctions because the backhaul or backbone spectrum is an essential component for seamless operation of next-generation cellular services.

Some experts say unless a service provider has robust backhaul spectrum, providing 5G services can become a challenge for the company.

“Nowhere in the world is backhaul spectrum auctioned, and if we adopt that route it would not be in sync with the international best practices,” an official said, adding some officials are suggesting the auction route to avoid any scrutiny in the future.

A sector expert said spectrum was an intangible resource and should be given on administered low prices.

“If the demand for spectrum exceeds the supply, it should be auctioned. Currently, the demand does not exceed the supply,” said Mahesh Uppal, an independent telecom expert.

The Comptroller and Auditor General in its report in January pointed out MWA spectrum was allocated to a telecom operator in 2015 on a first-cum-first-served basis in contravention of the recommendation of a DoT committee, constituted in December 2012.

The DoT panel had proposed spectrum allotment in the microwave band to all the operators through auction.

The Supreme Court in 2012 had struck down the first-come-first-served policy in the 2G spectrum allocation case of 2008-09 and cancelled 122 telecom permits.

The Telecom Regulatory Authority of India in its recommendations in 2014 said the DoT should continue to allot backbone spectrum on a first-come-first-served basis.

FDI in telecom sector jumped five times in three years: Manoj Sinha

Source: Business Standard, Sept 25, 2018

New Delhi: Foreign direct investment (FDI) in the telecom sector has jumped nearly five times in the last three years – from $1.3 billion in 2015-16 to $6.2 billion in 2017-18, Communications Minister Manoj Sinha said today.

Although the Minister did not share specific details, he said FDI would be the key to unleash the full potential of upcoming technologies like M2M, machine learning, artificial intelligence and internet of things.“India lost its chance to get full advantage of the first industrial revolution, but we cannot afford to miss the bus now. India must not only be a pioneer in rolling out these technologies but also in developing them,”Sinha said.

Read the rest of this entry »

Vodafone Idea to merge Aditya Birla Telecom

download (3).jpgSource: LiveMint.com, Sept 17, 2018

New Delhi: Telecom operator Vodafone Idea Limited will merge Aditya Birla Telecom Ltd, which holds 11.15% stake in telecom infrastructure firm Indus Towers, with it.

“The Board of Directors of Vodafone Idea Limited (VIL) … has considered and approved a scheme of amalgamation of Aditya Birla Telecom Limited (ABTL), a wholly-owned subsidiary of the company, with the company,” Vodafone Idea said in a regulatory filing.

Read the rest of this entry »