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Wednesday, October 18, 2017
Telcos ask distributors to join GST network this week

Airtel's Sunil Mittal flags 'unprecedented market disruption' by Reliance JioBig phone companies have asked their distributors to complete all pending registrations under the goods and services tax (GST) this week, warning that a failure to do so could invite government action, throw up legal complications, disrupt prepaid services business and hurt revenue in the July-September quarter. Third-largest carrier, Idea CellularBSE 1.92 % is learnt to have set a July 10 deadline for its distributors to conclude GST registrations, while No 2 carrier, Vodafone India, is believed to have told its battery of distributors to do the same this week and also ensure their partner retailers follow suit, as every link in the distribution cycle is legally bound to comply with GST, three executives in the know told ET.

Telcos have told their distributors that if they fail to wrap up all pending GST registrations this week, it would become legally impossible for them to refill their talk-time balances, which would disrupt continuity of the prepaid services business, scuttle new activations and product launches, and in turn, hit revenues, the executives said. Telcos, their distributors and retailers were expected to wrap up GST registrations by July 1.

"If the problem lingers for several weeks post-July 1, the immediate revenue hit for the telecom industry could be around Rs 130-140 crore per month during the September '17 quarter," a senior executive of a leading mobile carrier told ET. One of India's biggest phone companies has asked all its distributors to get GST-registered immediately. "Legally, there are turnover-based exemptions, but we would want all our distributors to be registered to simplify things," a top executive of a Big 3 phone company told ET.

Under GST rules, any business entity supplying goods and services with an annual turnover of Rs 20 lakh has to register, while the threshold is Rs 10 lakh for those operating in the Northeast. A senior executive of another Big 3 phone company said "our distributors have also been told to get cracking on registrations and also coax partner retailers to get GST-registered quickly as a retailer's GST liability would come on the distributor if it fails to complete the registration process".

Though the situation has improved marginally over the past week, the level of pending registrations across the telco distributor/retailer fraternity on a national level remains sizeable. More than 90% of mobile phone users subscribe to prepaid services, which generate as much as 80% of telecom operators' revenues. If distributors of such services fail to complete GST registration formalities, they will be unable to legally seek talk-time refills from telcos, and in turn, not be able to offer the same to partner retailers.

If the retailers are unregistered, they too will be unable to sell prepaid recharge vouchers and top-ups to nearly a billion prepaid users. The GST registration woes come on the heels of telcos already under pressure amid intense competition and have sought incentives from the government to ease financial stress levels.

Bharti AirtelBSE 2.27 %, Vodafone India, Idea, Reliance CommunicationsBSE 5.93 %, Reliance Jio Infocomm, Aircel and MTS India did not reply to ET's queries at press time. Separately, telcos are also bracing for a negative impact on Ebitda — albeit limited — in the April-June '17 period for having incurred one-time costs towards overhauling software/billing systems to ensure they were GST compliant from July 1.

Experts reckon each pan-India operator has spent nearly Rs 50 crore on such systems reconfiguration, while smaller telcos have each shelled out Rs 20-30 crore for the same. Angel Broking fund manager and telecoms sector watcher, Mayuresh Joshi, however, feels these additional costs incurred for rejigging software/billing systems "will not make a material difference to telco Ebitda levels in the June quarter as these are one-time expenses of a non-recurring nature". (Source: Economic Times)

DoT insists on GPS in low-cost phones; price may go up by 50%, says industry

DoT insists on GPS in low-cost phones; price may go up by 50%, says industryCiting consumer safety, especially of women, Department of Telecom has rejected handset makers’ demand for using alternative technology instead of GPS in low-cost mobiles, while the industry warned that the decision will push up prices of such feature phones by over 50 per cent. The government has made it mandatory to install Global Positioning System (GPS) in all mobile phones, including feature phones that will be sold in India, from January 1, 2018 so as to locate subscribers in emergency situations.

“GPS is the main tool regarding location details of the subscriber in emergency, so government has decided to implement it in all the mobile phone handsets from 1 January 2018 in a positive manner,” the DoT has said in a reply to industry body Indian Cellular Association (ICA). ICA, which represents majority of mobile phone companies in India, had written to the government to use A-GPS technology which can help in locating callers using mobile towers near their location.

DoT however said the method used for locating caller with the help of mobile towers is not very accurate. When contacted, ICA National President Pankaj Mohindroo said: “The price of low-cost feature phones may rise by over 50 per cent as adding GPS system will require better configuration.” (Source: The Hindu Businessline)

DoT asks FinMin to slash telecom revenue target by 40%

DoT asks FinMin to slash telecom revenue target by 40%DoT had earlier projected a FY18 revenue target of Rs 46,351 crore
The financial stress in the telecom industry is set to reflect in the revenues flowing into the government exchequer during the current financial year (FY2017-18). The Department of Telecommunications (DoT) has expressed its inability to meet its revenue target of Rs 47,305 crore for FY18 and has asked the finance ministry to revise the projection to Rs 29,524 crore — almost a 40 per cent fall. In a letter to the finance ministry, reviewed by Business Standard, the DoT has said given the severe financial stress in the telecom sector and rapidly declining revenues of all major operators, the revenue targets for the DoT for FY18 would require a downward revision. The DoT had earlier projected an FY18 revenue target of Rs 46,351 crore, which was revised upward by the finance ministry to Rs 47,305 crore.

However, the DoT has pointed out that for the last three quarters, revenues of telecom service providers have been falling continuously, resulting in a drop in licence fees and spectrum usage charges (SUCs). Telcos pay eight per cent of their revenues as licence fee, and three to six per cent of the adjusted gross revenue as SUC to the government. “The fall in licence fees in the fourth quarter (Q4) was more than 25 per cent over the previous quarter (third quarter, or Q3), with actual collections coming down to Rs 2,686 crore, from Rs 3,450 crore in Q3.

The sector’s gross revenue, which was Rs 2.36 lakh crore in FY2015-16, fell by Rs 26,000 crore in FY2016-17 to Rs 2.10 lakh crore,” the letter said. The department believes that the trend of falling revenues will persist for some time due to promotional offers and low tariffs. Bundled voice and data integrated plans introduced by telcos, too, have hit revenues.

The letter cited market analysis to say that estimated price cuts have ranged between 45 and 67 per cent of data recharge. The telecom industry already has outstanding debts of about Rs 4.5 lakh crore, incurred mainly on account of payments for spectrum, SUCs and other levies.

The industry has repeatedly, in its communication with the DoT, expressed concern over the financial stress in the sector. Competition unleashed by Mukesh Ambani-owned Reliance Jio, which commercially launched its services September last, is believed to have adversely affected the telcos’ financials further.

The government has formed an inter-ministerial panel to address industry concerns. The panel recently held meetings with operators and banks to understand the problems faced by telcos. The DoT said there was a concern that the fall in revenues might slow down the ability of operators to invest in capex (capital expenditure) to fund growth of the capital-intensive sector. “It is estimated that the sector would require an investment of Rs 2.5 lakh crore up to 2020. Falling revenues will constrain the capacity of operators to invest in network upgradation and adopt new technology, thereby further impacting revenues,” the letter said.

The capacity of operators to fund capex through borrowing is also constrained, in view of their stretched balance sheets, the letter said. “The sector is highly leveraged and as per assessment of the banking sector, total outstanding liabilities of operators could be as much as Rs 7.29 lakh crore.” In an advisory, the Reserve Bank of India is learnt to have asked banks to review loans to operators, and to consider making provisions for standard assets in this sector at higher rates, so that necessary resilience is built into the balance sheets, should the stress reflect on the quality of exposure to the sector at a future date.

Giving a break-up, the DoT has told the finance ministry that the licence fees were likely to fall to Rs 9,255 crore for FY18, against the target of Rs 17,497 crore. Similarly spectrum charges, which include SUC, deferred payments and spectrum auction, are likely to be Rs 17,057 crore, against the target of Rs 26,445 crore. The deferred payment is likely to be Rs 12,054 crore for FY18. “With operators struggling to retain customers, it is expected that there will be some more downward adjustments in tariffs in the first three quarters at least, which may not be adequately compensated by rise in traffic volumes,” the letter said.

In the first quarter of FY18, advance collections of SUC have shown a decline of eight per cent over the previous quarter. Based on this and the general trend in revenues, the DoT fears SUC for FY18 may be significantly lower at Rs 4,970 crore. (Source: Business Standard)

Inter-ministerial group to meet telecom companies this week on industry’s financial woes

Inter-ministerial group to meet telecom companies this week on industry’s financial woesThe industry’s key demands include reduction of licence fee to 5 per cent (from 8 per cent), and flat 1 per cent spectrum levy.The inter-ministerial group, comprising officials from ministries of communications and finance, is set to meet telecom operators this week to discuss the financial difficulties being faced by the industry and measures that can be taken to ease the situation. The first of these meetings kick-off on Monday, with the group slated to meet senior executives from Reliance Jio, Reliance Communications, Tata Teleservices and Aircel, sources told PTI.

Over the course of the week, the IMG will also meet other operators including Bharti Airtel, Vodafone and Idea Cellular, as well as top officials of telecom PSUs Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd. The operators will be asked to suggest measures which can be taken by the government to address financial woes of the industry that is reeling under revenue and profitability pressures as well as mounting debt.

On June 15, the Telecom Regulatory Authority of India too is scheduled to meet the operators to discuss their financial pain and seek views on a policy prescription. Investors and analysts will be keenly watching out for cues from these meeting, as the parleys will set the tone for relief measures that could be in the offing.

The industry’s key demands include reduction of licence fee to 5 per cent (from 8 per cent), and flat 1 per cent spectrum levy. The industry also wants the deferred payment liability of spectrum to be aligned to the life of the airwaves, that is, 20 years with a moratorium of five years and repayment of 15 years. The telecom sector has a debt of Rs 4.6 lakh crore. A recent investor presentation by Reliance Communications warned that the sector could be staring at 30,000 to 40,000 job losses over the next 12-18 months.

Incidentally, India, with over 1.16 billion mobile users, is the second largest telecom market in the world after China. But telecom operators here lament they are facing pressure on income, profitability and other financial metrics on account of competition intensified by the entry of Mukesh Ambani-owned Reliance Jio.

Last month, Idea Cellular reported a consolidated loss of Rs 325.6 crore in the three-month period ended March 2017, hurt by the severe tariff war. India’s largest telecom operator Bharti Airtel too reported its lowest quarterly profit in four years as net earnings plunged 72 per cent in January-March, hit by “sustained predatory pricing” by Jio.

Debt-laden Reliance Communications, that has faced a slew of rating downgrades over the last few days, reported its first annual loss since its inception at Rs 1,283 crore for the fiscal ended March 2017. (The Indian Express)

Chandrababu Naidu asks Apple's Jeff Williams to invest in Andhra Pradesh

Chandrababu Naidu asks Apple's Jeff Williams to invest in Andhra PradeshOn the second day of his US visit, Andhra Pradesh Chief Minister N Chandrababu Naidu met top executives of some of the world's largest technology companies and sought investments from them in his state. The much-anticipated Apple's foray into Andhra Pradesh got a fillip on Saturday following Naidu's meeting with the company's Chief Operating Officer Jeff Williams. Naidu told Williams: "This is the right time for Apple Inc to invest in India as it has been growing consistently". "Being a state that has just begun building itself from the scratch post-bifurcation, Andhra Pradesh offered tremendous opportunities. Apple would do well to enter AP which has been adjudged the best state to do business with and has a productive young population," the chief minister said.

Naidu will also receive the 'Transformative Chief Minister Award' during the United States-India Business Council (USIBC) West Coast Summit in Silicon Valley. The USIBC has selected Naidu for the award for his efforts to strengthen ties between the countries at the state level. The summit will see the participation of 150 industry leaders from sectors such as information technology, banking, food processing, healthcare, clean energy and digital payment.

Texas-based Dell has expressed interest in setting up a data centre in the Andhra Pradesh capital. The technology giant expressed keen interest when Naidu met Srikanth Satya, a top executive of Dell in Dallas. Naidu visited the University of Silicon Andhra after the NRI CEO's meet.

Various MoU's were signed with Innova Solutions, I-Bridge Inc and EVX Solutions, which is expected to create over 12,000 jobs.
Andhra govt aims to have a computer expert, entrepreneur and artist in every house.

Naidu also held a meeting with California Governor Jerry Brown and invited the US state to join hands with AP as "we build a greenfield capital with global opportunities". Among others who met Naidu were Gopi Sirineni, VP, Qualcomm, NIO USA CEO Padmasree Warrior, Mike McNamara, CEO of Flextronics.

The leaders expressed their interest in AP's Fiber Grid project, and expansion of their respective companies in the state.
Naidu appreciated the innovative efforts taken toward mobility and learnt about various features of the driver-less car at Waymo during Google X visit.

On Saturday, Naidu paid humble floral tributes to Mahatma Gandhi's statue at the largest Gandhi Memorial in Irving, near Dallas.
Naidu appreciated Prasad Thotakura, the person behind the initiative, and his dedicated management team for their relentless efforts in building huge memorial in 5 months with one million dollar budget and collaboration with Irving city officials.

Naidu was later in the evening greeted at the community wide reception by thousands of Indian origin Telugu community members at Irving, Conventions Center.

Indian Consul-General in Houston, Anupam Ray, welcomed Naidu at the reception and gave a quick overview of the Telugu community, praising them for their contribution in creating jobs and prosperity. Naidu lauded the Indian Americans and people of Telugu origin for their enormous contributions and said that he was looking forward to make Andhra Pradesh a model state for the rest of the world by garnering strong business alliances in the USA.

Naidu is accompanied by his 16-member team comprising Finance Minister Yanamala Ramakrishnudu, Government Advisor (Communications) Parakala Prabhakar and senior officials, will visit Washington DC, San Francisco, California, New York, Chicago and other states.

Agreements for sister-state relations with California, Illinois and Iowa, and bilateral meetings with 35 CEOs of some of the world's biggest companies will be the highlights of the tour. As per the Ministers US Itinerary from his office, he would visit the offices and manufacturing facilities of companies like Apple, Tesla, CISCO, Oracle and Flextronics.

During the visit, he would hold discussions with the Universities of Stanford, Iowa, North Texas and Dallas. MoUs would be signed with some of them, like the one for collaboration in seed science with the Iowa State University. (Source- ETtelecom)

Ardom Telecom acquires Quanta Towergen

Ardom Telecom acquires Quanta TowergenThe Quanta Towergen acquisition is expected to provide Ardom Telecom a significant foothold into a fast-growing telecom infrastructure market. Telecom infrastructure operation and maintenance firm Ardom Telecom Pvt. Ltd on Sunday announced the acquisition of Quanta Towergen for an undisclosed amount.
Ardom, backed by L&T Infra Investment Partners, announced the “acquisition of 100% shareholding in Quanta Towergen Pvt. Ltd (QTPL), owned by Quanta Services Netherlands BV, in turn owned by Quanta Services, an all-cash deal.”

“The acquisition is part of Ardom’s strategy to strengthen its fixed energy cost business and is expected to provide Ardom a significant foothold into a fast-growing market,” it said in a statement. “This acquisition is in line with our objective of providing sustainable and reliable clean energy to telecom sites under long-term contracts to create value in the company,” Ardom managing director and chief executive officer Ajit Shankar said. (Source:Mint)

Tower operators seek special treatment from electricity boards

Tower operators seek special treatment from electricity boards"We want all state governments to direct their electricity boards to give special treatment to telecom sector and tower operators," said Akhil Gupta, Chairman of TAIPA.
BHUBANESWAR: Terming power issues as a major challenge before them, telecomtower operators have sought special treatment from electricity supply outfits across the country to ensure efficiency in telecom sector. "We want all state governments to direct their electricity boards to give special treatment to telecom sector and tower operators," said Akhil Gupta, Chairman of Towers and Infrastructure Providers Association (TAIPA).

Power problem happens to be a major challenge before the telecom sector in different parts, particularly eastern region, said Gupta who was here to participate in a workshop organised by the TAIPA.

Gupta, who happens to be the Vice Chairman of Bharti Group and Executive Chairman of Bharti Infratel Limited, said the tower operators are keen to create a robust telecom infrastructure in eastern region for which proper availability of power is essential.

While the power scenario in Odisha happens to be highly satisfactory, in some other states telecom tower operators are hit by non-availability of electricity or erratic supply, he said.

Another challenge before the telecom tower operators in the region has been insurgency and Maoist menace in the region, Gupta said adding that there has been considerable improvement in the situation in recent times following effective steps taken in the states.

Stating that the number of towers sites in eastern region at present stood at 77,855, he said this needs to double by April 2018 to 2 lakh tower sites.

While marching towards achieving the goal of installing the desired number of towers, the operators often face restriction on location of cell sites, high fees being levied apart from multiple levies like registration, sharing and renewal, said a senior TAIPA functionary.

Delay in getting clearances and requirement of multiple NOCs from various departments also affect the work of telecom tower operators in the region, he said.

The region also witnesses frequent fibre cuts, high incidence of taxes on cellular towers and complicated, cumbersome and time consuming procedures, said Gupta and other TAIPA officials.

Some of the common issues faced by telecom tower operators in the eastern region are restrictions of tower installation near water bodies, schools, hospitals, religious places, railways, high tension electrical lines and heritage sites, they said.

Optimistic about expanding their network, Gupta said states like Odisha have been extending necessary cooperation and assistance to the telecom tower operators in a dynamic manner. (Source: ETTelecom)

Telcos on 4G spectrum acquisition overdrive as data consumption soars

Telcos on 4G spectrum acquisition overdrive as data consumption soarsTelecom operators in India are on an overdrive to acquire additional 4G capacity spectrum to spruce up networks in terms of speed and riding video content amid the sharp upsurge in data consumption levels, analysts and industry experts said.  Bharti Airtel’s decision to buy Tikona Digital’s 4G business, they said, reaffirms the faith among the established carriers in 4G capacity spectrum to maintain high quality customer experience in the future. This comes amid expectations of price rationalisation in the next 12-18 months, now that Reliance Jio Infocomm’s free services are drawing to a close by the month-end.

“When you see a monumental jump in data consumption demand in a very short span, any Jio competitor will need to tank up on 4G capacity spectrum at the earliest to support comparable data services offerings to ring-fence the experience of upper-tier customers, especially video content,” Sanjay Kapoor, a former CEO of Bharti AirtelBSE 0.59 % told ET. 

Jio, he said, has almost “overnight triggered a near thirtyfold jump in data offered to subscribers” to 28 GB per customer per month on average from 750-900 MB per customer per month earlier, which is the principal trigger for incumbent carriers to invest in 4G capacity spectrum in the 2300 MHz and 2500 MHz bands. 

Incumbents, he said, will need to transform quality and capacity of their existing mobile broadband networks “to be able to seamlessly handle a manifold jump in data consumption levels in the coming quarters since there is a new normal set by Jio by way of its bundled offerings”. 

Swiss brokerage UBS said the recent pickup in M&A activity reflected in Bharti Airtel’s recent acquisitions of Tikona and Telenor’s 4G airwaves along with the Vodafone-Idea Cellular merger suggest that “industry RoIC (return on invested capital) levels are unsustainably low, and spectrum ownership and ability to spend capex will be key in surviving in a high data volume environment”. 

Earlier this month, Jio’s GB-rich ‘Prime’ offerings propelled the country’s top three mobile carriers — Bharti Airtel, Vodafone India and Idea CellularBSE -0.82 % — to unleash equally aggressive counter-offers to prevent customer churn. Telcos have been bulking up on capacity spectrum, particularly airwaves in the 2300 MHz band, which emerged as the key 4G band in the October 2016 auction. 

Experts said that Jio and Airtel’s additional purchases of 2300 MHz spectrum had prompted the No. 2 carrier, Vodafone India, and the third largest operator, Idea Cellular, to target more affordable capacity airwaves in the 2500 MHz band to sustain competitive edge in their leadership markets, although commercial deployment is unlikely in this 4G band for the next 12-18 months in the absence of a suitable devices ecosystem. 

Kapoor, however, said that investments in 4G capacity spectrum alone won’t do the job, asserting that these will need to be “backed with sizeable capex/opex in electronics (base stations, routers and antennae), backhaul and customer experience to make meaningful sense of the raw material, as in capacity airwaves. 

Another senior industry executive, who did not wish to be identified, said that a telco’s data capacity and coverage will need to be “optimally synchronised with riding apps, content, services and devices to create a quality customer experience, which will then give competitive edge”. 

Brokerages UBS and JM Financial said that Bharti Airtel has sufficiently reinforced its capacity spectrum following the Tikona deal as it now has 30 MHz blocks of 4G airwaves in the 2300 MHz band in as many as 13 out of the country’s 22 telecom circles.  Brokerages UBS and JM Financial said that Bharti Airtel has sufficiently reinforced its capacity spectrum following the Tikona deal as it now has 30 MHz blocks of 4G airwaves in the 2300 MHz band in as many as 13 out of the country’s 22 telecom circles. Analysts at JM Financial said that Airtel effectively has “the highest spectrum holding in the industry with an aggregate 1505 MHz of pan-India spectrum holdings across all bands”, which is 22% more than Jio’s total airwaves bank. 

The senior executive cited earlier disagreed, though, saying, “If the future of voice is VoLTE and that of data is LTE, having a huge bank of spectrum segregated across 2G, 3G and 4G platforms won’t make sense as a telco’s competitive edge vs Jio would primarily stem from its quantum of pure 4G spectrum holdings”. (Source: Economic Times)
BSNL, MTNL merger to help both firms: BSNL CMD Anupam Shrivastava

BSNL, MTNL merger to help both firms: BSNL CMD Anupam Shrivastava Amid renewed push for BSNL-MTNL merger, BSNL CMD Anupam Shrivastava has said the combination will be "advantageous" for both the state-owned telecom firms but issues pertaining to debt and salary structure will need to be sorted out first.
A Parliamentary panel report has pointed out that the Telecom Department is planning to place the merger proposal before the Cabinet by June.

The Standing Committee on Information Technology last week had said: "On the plan for merger of BSNL and MTNLBSE 3.29 %, the same would be taken to Cabinet before June."

Earlier, a top-level meeting at the Telecom Department last month discussed the possibility of merging both the entities that are facing financial stress due to increasing competition in the sector. "There is synergy between BSNL and MTNL...there is no doubt about it, especially when we look at the enterprise and mobile business segments," Shrivastava told when asked if he favours the merger.
Per se, he said, it would be "advantageous" to the two organisations.

He also pointed to certain "impediments" that would need to be sorted out before the merger can actually take place.
These include variation in salary structure of employees of the two corporations, which Shrivastava feels will need to be discussed with unions for consensus-building, besides MTNL's debt overhang.

"MTNL has a huge debt and that debt has to be looked into should not happen that after the merger, the entity becomes heavily burdened," Shrivastava said. On a positive note, a potential merger would enable the corporation to offer pan-India mobile services including in lucrative markets of Mumbai and Delhi, and infuse fresh capital to bolster the network, he said. MTNL offers mobile services in Delhi and Mumbai. BSNL, on the other hand, operates in rest of India.

"For the enterprise business too, a pan-India footprint is important. Typically, large enterprises have headquarters in Mumbai and Delhi, where we are not present. So, a complete pitch requires coordination with MTNL and vice versa," he said.

BSNL's enterprise business is growing at 35 per cent, but a potential merger and a pan-India footprint could push up growth rate to 45 per cent or thereabouts, he added. (Source: Economic Times)

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