Tariff hike will boost govt revenue, telcos' finances: COAI

Mobile operators' association COAI has told the government on the recent tariffs hike by the telcos will improve their financial health, and borrowing capacity and boost the AGR collection for the government.

In a letter to DoT Secretary Anshu Prakash, Cellular Operators Association of India Director General Rajan Mathews said: "Historically telcos have reduced tariffs, but the present increase is motivated by the dire financial situation of most TSPs, resulting from unsustainable levels of debt incurred for payments of spectrum won in auctions."

The hyper competition in the industry has lead to financially unsustainable tariffs that have reduced profits after tax to single and sometimes negative amounts, and the return on capital has sunk to low single digits, he said in the letter.

There is also pressure of doubling up of both upfront spectrum payments and continued revenue share obligations which cumulatively amount to approximately 14-15 per cent AGR. And this, along with GST of 18 per cent, means that over 30 per cent of the top line revenues of the TSPs goes to the Government by way of taxes and levies, said COAI.

The letter further said both domestic and international banks are unwilling to provide any form of liquidity to the TSPs given the poor financial prospects of the operators. This has created shortfalls in working capital funds and resulted in severe debt servicing.

Still in spite of such a situation, TSPs, even after the tariffs hikes, continue to provide lowest tariffs for data at Rs 11 for 1 GB. This is much below the rates paid by consumers 4 years ago at Rs 225 per GB and Rs 330 in 2010, the COAI noted.

Voice rates have also been low with ARPU at Rs 80 from Rs 118 in 2017 and Rs 141 in 2010, it added.

The COAI's letter also said the hikes will improve financial health of the telcos, their borrowing capacity, result in more dues to the government with higher AGR and their network expansion and upgrading, which will lead to better quality of services.