Going forward, we have asked for a redefinition of the AGR based on TDSAT ruling and then reducing the licence fee and spectrum usage charge, says Rajan Mathews, DG, COAI. Excerpts from an interview with ETNOW.

With cries of help from the telecom sector veterans and corporates, do you think this kind of a cut in the licence fee will do precious little or would it be a step in the right direction?
First of all, it is more than a cry, it is a scream at this point, in terms of what the industry is looking for. There is a combination of factors that the industry was really looking to pull itself up out of this situation. One, clearly concerns the AGR issue. Going forward, we had asked for a redefinition of the AGR based on the TDSAT ruling and then basically reducing the licence fee and spectrum usage charge.

If the government is considering that and we did pitch it to the finance minister last week when she was holding open house meetings vis-à-vis inputs into the budget. She had indicated that the government was considering this and that the DoT should continue to push for that. Any relief that comes from 2-3% or more reduction in licence fees, spectrum and usage charges would be a great boost to the industry in terms of cash flow.

Tariffs will have to continue to increase because that is the industry’s responsibility. It is a combination of factors that is going to address the financial distress the industry finds itself in.

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Is the AGR issue so precarious that only some sort of aid from the government is likely to solve things?
Very clearly yes, because when you look at the revenue stream for operators, 30% of every rupee of the top of our revenue stream goes to the government. That is why we have requested the government to address the situation. You cannot continue to extract that type of revenue from the industry and ask to just rely on tariff increases because at some point, consumers will have a problem.

It is a combination of factors — the government being able to address the reduction in its stake from the revenue stream which is AGR and in addition to that, the discipline from the industry in terms of having to raise tariffs. The combination again is there. There is no one silver bullet either from the government or the tariff itself that is going to address the issue.

On AGR, we have had conversations with DOT and they have indicated that they are waiting for the review petitions to be finalised with the Supreme Court and once the Supreme Court makes its determination on the two review petitions that are up there, then they will be in a situation to determine the way forward.

One additional factor on the AGR now is the larger impact vis-à-vis other companies like GAIL and elsewhere. The issue of AGR seems to be spreading beyond just the telecom operators. This is going to be an additional factor that the government will have to consider in terms of addressing AGR now.

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What do you make of the developments that are happening in the telecom space right now? When I talk about the developments, I am talking about the price hikes that have happened. Yesterday, a new offer was announced and it does not seem to be disruptive by one of the top players. Do you think the industry is getting to a rational mode? Can prices go up further from here on?
Yes, we have been saying that tariffs will have to be raised in the short term by at least Rs 200 ARPU and we are trying to get that discipline embedded in the industry.

There is a concerted understanding that unless tariffs move in the right direction, no amount of relief from the government itself is going to be adequate. We are hoping that these will be done in a reasonable, rational and appropriate manner.

We are hoping to see how that takes. There is a 35-40 day lag as the old plans that are already embedded in the industry move out and the new plans take effect. We are waiting to see how the new tariffs impact consumers.





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