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Thursday, February 25, 2021
Budget 2021: Debt-laden telecom sector expects tax reliefs, lower licence fee

According to EY, the industry expects Budget to offer price support in the form of Goods and Service Tax (GST) exemption from regulatory payments such as license fee and spectrum usage charges (SUC)

The cash-strapped telecom industry, which is battling with competitive pricing and Adjusted Gross Revenue (AGR) dues, has been pinning its hopes on the Union Budget 2021 to offer some breather. According to EY, the industry expects Budget to offer price support in the form of Goods and Service Tax (GST) exemption from regulatory payments such as license fee and spectrum usage charges (SUC).

The debt-laden telecom sector, which faces blockage of capital in the form of GST input tax credits (GST ITC), seeks a refund of unutilised ITC of Rs 35,000 crore for planned investments in the upcoming spectrum auction and a probable rollout of 5G later this year, says EY. The industry has also demanded removal of time limitation or an extension of the time for claiming MAT (Minimum Alternate Tax) credit, which remained unclaimed due to losses in recent years. Cellular Operators Association of India (COAI), the body that represents telecom operators, has asked for a reduction in licence fee and SUC levies. At present, there are two components to 8 per cent license fee- Universal Service Obligation Fund (USOF) of 5 per cent and license fee of 3 per cent. COAI has urged DoT to reduce license fee from 3 per cent to 1 per cent, and USOF contribution down to 3 per cent, with an objective of removing these charges over the next 2-3 years.

Among the world's cheapest and fastest growing market, India's telecom sector faces issues of soaring debt. Telecom companies owe Rs 1.47 lakh crore in additional statutory dues to the government, following the Supreme Court observation on AGR. They owe Rs 92,642 crore as licence fee, and Rs 55,054 crore as spectrum usage charges. Though the companies have made partial payment, substantial amounts still lay outstanding. Besides, the COVID-19 pandemic has thrown up new challenges, pushing the telecom operators to increase their network resiliency and reliability to deal with increasing data usage. The pandemic has led to an increase in demand for telecom services with work-from-home, remote education, home entertainment.

In the backdrop of slowing economy and the telcos' planned investments, particularly in 5G, the telcos hope for an industry-friendly Budget.

In the last Union Budget, Finance Minister Nirmala Sitharaman had more than doubled its revenue estimate from the debt-ridden telecom sector to Rs 1.33 lakh crore in fiscal year 2020-21, mainly on account of levies derived from AGR, license fees and spectrum usage charges. (Source: Business Today)

TCS, Wipro See their India Revenue Growing as Local Cos Take to Tech

TCS logs 18% growth in India business in Q3, while Wipro saw 14% rise in India state-run enterprises biz. Tata Consultancy Services and Wipro have witnessed strong growth in business from India, helped by higher spending by local clients on technology as they emerge stronger after the disruption caused by the pandemic.

While TCS posted nearly 18% growth in India business during the fiscal third quarter, Wipro saw a near 14% expansion in its India State Run Enterprises (ISRE) business. Wipro spun out the ISRE segment in October 2018 for businesses from government-run organisations.

“India enjoyed a second quarter of sustained growth momentum, but coming off a very strict first quarter. Last quarter there was a bounce back from the private sector and this quarter we have also seen increased activity on our assessment and transactional businesses,” TCS chief executive Rajesh Gopinathan said during the quarterly results conference.

The assessment business refers to TCS iON, which is a strategic unit of the company focused on providing academic institutions, government departments and firms from various sectors with the infrastructure for their recruitment/admissions processes and skilling initiatives.

The transactional business refers to engagements where TCS is paid on a per-transaction basis, such as the partnership with the Ministry of External Affairs to issue passports to Indian citizens through the nationwide network of Passport Seva Kendras run by the company.

Both are India-specific businesses at TCS.

Gopinathan, however, said the volatility in growth was because of the low base from the domestic market. “It is not that we are back to very high economic activity or we are not seeing runaway recovery right now,” he added.

At Wipro, the focus of the ISRE segment is to complete some of the longpending system integration projects in India, chief financial officer Jatin Dalal said. “As you can see, we have steadily improved the execution rhythm in that segment (and) have improved profitability (wherein) we had losses earlier in this quarter,” he added.

Wipro reported ISRE segment revenue of ₹240 crore for the past quarter.

Not every Indian IT services company is “equally” invested in the domestic market, analysts said. “For example, while companies like TCS, HCL Tech is focused, not all its peers are. The India market offers these companies low margin and at the same time opportunity for consulting business is very small here,” said Sanchit Vir Gogia, chief executive of Greyhound Research. (Source: Economic Times)

Microsoft seeks to fill void if Google exits Australia: Reports

Xiaomi’s Mi 11 will not ship with a charger inside box, CEO Lei Jun confirms Australia's government has designed a mandatory news media bargaining code that would force Facebook and Google to compensate local publishers for hosting news stories on their platforms.

Microsoft has a "Plan B available" if Google follows through on threats to leave Australia over plans to compel digital giants to pay news organisations for content, local media reported Monday.

Australia's government has designed a mandatory news media bargaining code that would force Facebook and Google to compensate local publishers for hosting news stories on their platforms.

Both US tech firms have threatened to block key services in Australia if the new law goes ahead. Google Australia managing director Mel Silva last week told a parliamentary inquiry the company would withdraw its popular Search function from Australia if the code becomes law.

Microsoft CEO Satya Nadella contacted Prime Minister Scott Morrison within days to make clear Microsoft's Bing search engine could expand if Google exits, The Australian reported.

The pair spoke last week, the newspaper said, with Nadella reportedly saying Microsoft had a "Plan B available".

Treasurer Josh Frydenberg has confirmed the call, saying the government was in detailed discussions with "players across the industry".

Australia has reserved the right to impose the code on other platforms and it is unclear whether Microsoft's MSN service, which links to local news stories, could be affected in the future.

"With respect to the current controversy over a potential code of conduct governing Google and Facebook, Microsoft is not directly involved and we wouldn't want to comment on that ongoing process," a Microsoft spokesperson said in a statement.

Facebook CEO Mark Zuckerberg has also been lobbying Australia, contacting Frydenberg last week to discuss the code and its impact on the social media giant.

Frydenberg told the ABC it was a "very constructive discussion" but "Zuckerberg didn't convince me to back down".

Facebook has warned it could block Australian users from sharing local news stories on its platform.

"I don't dismiss the threats but I'm not intimidated by them either," Frydenberg said.

"What I do know is that media businesses should be paid for content. And what I do know is that... whether it's on this issue, whether it's on cyber bullying or terrorist content on the internet, we have been prepared to take on the digital giants."

The law would require Google and Facebook to strike commercial agreements with news organisations or enter mandatory arbitration over the size of payments if they fail to agree.

The world-first proposal is being closely watched as governments grapple with how best to curb the growing power of tech giants.

While it has attracted wide backing from local media outlets, the US government has urged Australia to abandon the "burdensome" plan and World Wide Web inventor Tim Berners-Lee has warned it could make the internet "unworkable". (Source: ETTelecom)

‘4G spectrum only for BSNL's Delhi and Mumbai circles’

Damages to telecom towersGroup of Ministers leaves out MTNL. A Group of Ministers (GoM) has recommended allocation of 4G spectrum only to Bharat Sanchar Nigam Ltd (BSNL) in Delhi and Mumbai circles, and not to Mahanagar Telephone Nigam Ltd (MTNL), as earlier decided.

This follows the GoM’s recent decision to defer the merger of the two State-owned firms, citing MTNL’s high debt.

With no 4G spectrum, MTNL will have to use BSNL’s radio waves to offer the service. MTNL will continue to provide 2G services using its own spectrum in the two circles it operates. A decision on 4G spectrum allocation will be taken only after the Cabinet decides on the two companies’ merger, sources said. Last week, a GoM chaired by Defence Minister Rajnath Singh deferred the merger as MTNL becoming debt-free was one of the conditions. Now, the Cabinet has to take a formal decision on the merger.

On October 23, 2019, the Government had approved the merger of ailing telecom firms BSNL and MTNL and allocation of 4G spectrum to both. BSNL had sought 2100 MHz spectrum for pan-India operations (except in Rajasthan), while MTNL wanted 1800 MHz for Delhi, and 2100 MHz for Mumbai.

On January 11, the Government said BSNL rose from a loss of ₹3,596 crore for the half-year ended September 2019 to a profit of ₹602 crore in September 2020, while MTNL made profits of ₹276 crore in September 2020 from losses of ₹549 crore in September 2019.

On January 1, 2021, BSNL had invited proposals for prior registration and Proof of Concepts from Indian companies for its 4G tender for 57,000 sites, of which 50,000 are for BSNL and the remaining 7,000 for MTNL.

Meanwhile, a BSNL employees association has called for indefinite hunger fast from February 15, seeking implementation of its executives’ promotions approved by the public sector unit’s board in May 2018. The fast is under the aegis of the Sanchar Nigam Executives’ Association, which also wants the management to fill up vacancies following the company’s Voluntary Retirement Scheme. (Source: The Hindu Businessline)

GOVT LIKELY TO NET ANOTHER ₹8,000 CR FROM MARCH SPECTRUM AUCTION

Damages to telecom towersAirtel, Jio may Spend More on Airwaves. Trigger: Shorter notice for new tech use, such as 5G on 4G airwaves. Bharti Airtel and Reliance Jio Infocomm may spend 15-20% more than previously projected to buy spectrum in the March auctions, prompted by the government’s move to halve the notice period that operators need to give to offer new technologies such as 5G on 4G airwaves, said analysts.

As a result, the government could net as much as ₹8,000 crore more than the roughly ₹40,000 crore estimated from the March sale of 4G airwaves. Around a fourth of this could come into the government coffers this fiscal itself, as upfront payment. Both Airtel and Jio have 5G-ready networks. Bulking up existing spectrum will allow telcos to launch 5G services immediately without waiting for sale of 5G airwaves.

Spending an Extra 15-20%
Telcos can do this on a limited scale at least, in metro cities and Category A circles. For a broader rollout, they will need the 5G spectrum in the 3.3-3.6 GHz frequencies. The government, though, is yet to specify the schedule for auctioning 5G airwaves.

As per a recent tweak to spectrum auction rules, carriers can now offer new technologies, such as 5G, on their existing spectrum by giving six months’ notice to the government. Previously, there was a one-year notice period.

“Jio and Airtel could each spend an extra 15-20% on additional 4G airwaves in select bands in the metro and category A circles, as these 4G spectrum assets can now be deployed for future 5G use quickly,” Nitin Soni, senior director at global ratings agency Fitch, told ET.

Jio, the sole profit-making telco, was initially estimated to spend ₹20,000 crore in the upcoming airwaves sale while Airtel was forecast to spend ₹10,000-15,000 crore. Vodafone Idea, financially the weakest of the three private telcos, is unlikely to participate meaningfully in the sale. Soni expects Jio to bid only for additional 800 MHz spectrum, besides renewing its expiring airwaves in this key 4G band, but sees Airtel targeting additional 4G spectrum in both 900 MHz and 1800 MHz bands.

Airtel and Jio didn’t immediately respond to ET’s emails seeking comment.

READY FOR 5G
Experts foresee heightened interest in the 4G bands in the March sale, after Airtel recently demonstrated live 5G services on its 4G network using the 1800 MHz band and said it could commercially launch 5G with existing 4G airwaves in a few months. Market leader Jio, too, said it was ready to launch 5G in the second half of 2021 on its own technology. Jio also said it was 5G-ready and had developed its own ecosystem that would make it a global 5G vendor.

Analysts, though, maintained that a broader 5G services rollout would happen only after the Department of Telecommunications auctions mid-band 5G spectrum in the 3.3-3.6 GHz frequencies, the 5G devices ecosystem matures and more India-relevant 5G use cases emerge.

“Airtel and Jio would only be able do token 5G launches in select markets with 4G spectrum,” said Rohan Dhamija, partner & head (India & Middle East) at Analysys Mason. “There may be limited additional interest in select 4G bands with the halving of the notice period to switch to 5G. But Airtel and Jio won’t be able to offer a real 5G experience to customers without the actual mid-band spectrum and a mature devices ecosystem, which is still some time away.” (Source: Economic Times)

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