Telcos are set to approach the department of telecom (DoT) demanding that the 20-33% cut in licence fee be applicable to all players an
d not just to those operators whose services extend to over 95% residential areas in a state. They also want this cut to apply to the metros.

If the percentage coverage of total number of development blocks in a service area is covered by the licencee is over 95 per cent, the applicable universal service obligation levy will be three per cent instead of five per cent, which means the licence fee is automatically reduced for category A, B and C circles to eight per cent, six per cent and four per cent respectively, DoT said while amending the UASL licence.

However, the benefit is not applicable to coverage of metros. A DoT official said, the move is aimed at encouraging operators to go beyond metros and fulfil the licence conditions for network roll-out to increase tele-density.

The government last week had announced a cut in telcos contribution to the Universal Service Obligation Fund (USOF) which in turn will result in up to 33% reduction in the licence fee. The USOF is used to fund rural telephony.

Annual licence fee which operators pay to the government on a revenue share basis includes five per cent of USO levy. Bharti Airtel, Reliance Communications and BSNL which have country-wide presence will be able to benefit from this.

Telcos say that since the unutilised sum in the USOF kitty has already crossed the Rs 20,000 crore figure, any reduction in this levy should to be applicable to all players. Besides, they also argue that by inserting a rider of 95% coverage, the DoT was favoring state-owned BSNL.

“India’s telecom sector has been demanding a lower tax burden for several years now especially since the cellular industry here is confronted with one of the highest taxes in the world. The new announcement will not help any of the private telcos significantly,” explained an executive with a GSM player.

The executive also pointed out that data compiled by the telecom regulator Trai show that telcos pay up to 30% of their gross revenues towards different levies, as compared with 5-7% paid by the counterparts in other Asian countries.

The Cellular Operators Association of India (COAI), the body representing all GSM players, is set to ask the DoT to rework the coverage clause.

“Rather then a blanket 95% coverage, we want a graded system. Telcos should enjoy licence fee cuts in a gradual manner–for instance, they can avail a certain per cent reduction when their coverage reaches 60% of a specified area, followed by subsequent reductions when their networks are available in 70%, 80% and 90% of the residential areas,” said a COAI executive. “The new policy is tailored to help only BSNL,” he added.

Currently, all operators pay 5% of revenues in all circles towards the USOF. The DoT had announced that the USOFcontribution has been reduced to a flat 3% for those players whose services are available inover 95% of the residential areas from April, 2009.

Source : Times