Two-player telecom market would be too risky in India: Trai officials

NEW DELHI: A two-private player duopoly in the telecom market would be too risky in India, especially for the consumers, senior officials at the sectoral watchdog said. They pointed out that the telecom regulator had recommended relief measures such as a cut in the spectrum usage charge (SUC) and Universal Service Obligation Fund (USOF) levy long ago, but the government is yet to take any action.

“Three private companies as well as a government-backed player will be appropriate to cater to a billion subscribers. I think a two-player market is too risky,” a senior official at the Telecom Regulatory Authority of India (Trai), told ET. The official asked not to be identified.

On Thursday, the Supreme Court dismissed the review petitions of Bharti Airtel and Vodafone Idea against the October 24 order, which widened the definition of adjusted gross revenue (AGR) to include non-core items. Now, the two companies need to pay a combined Rs 89,000 crore by January 23, leaving many fearing that the loss-making Vodafone Idea, with over Rs 53,000 crore dues, may not survive. This would lead to a duopoly in a market with over a billion subscribers.

However, India's telecom market is very attractive for investors with such a large subscriber base and surging data consumption, making it a good business case for three private telcos to service it, official said.

“The consumer base of more than a billion, with nearly 300 million for three operators is a very large pie,” one of the two officials said. The official added that while the voice income had become stagnant, data revenue is massive and continuously growing.

“With internet becoming pervasive, India is becoming a very attractive market and if somebody argues that the sector was not worth investing, it is merely a fallacy,” the official said.

The official was referring to comments from Vodafone Idea chairman Kumar Mangalam Birla that the Aditya Birla Group won’t invest any more equity in the telecom venture with the Vodafone Group, which has also taken a similar line. The officials also noted that Trai had, long back, recommended steps which would have helped the industry, but the government had chosen not to act on it so far.

“To ease the industry’s stress, we had already recommended a slew of measures including reduction in the SUC and USOF levy, but the government has so far not taken any action,” said another regulatory official.

In April 2015, Trai had recommended that the USO levy, a part of the licence fee, should be reduced to 3% from 5% of the telcos’ adjusted gross revenue (AGR). It also suggested reducing SUC to 1% over time. Currently, telcos pay 8% (including 5% for USOF) as license fees and 3-4% as SUC. Both are on the basis of AGR.

The telecom department also recommended these measures to the finance ministry, which stalled them as they have a negative revenue impact on government’s finances.

In November, the government cleared a two-year moratorium on spectrum payments, giving India’s three private telcos a Rs 42,000-crore breather from paying till 2021-2022.