Presentation to the Hon’ble Minister of
Communications & Information Technology
By AUSPI
Association of Unified Telecom Service Providers of India
19 January 2006 : New Delhi
1
Revenue Share License Fee
2
Reduction in Revenue Share
License Fee
• Unprecedented growth of telecom sector resulted in
exceeding target of NTP 99 much ahead of
stipulated time.
• This growth has been facilitated due to migration
from fixed license fee to revenue share regime.
• In line with recent government decision of reduction
in revenue share license fee for long distance
services, there should be reduction in license fee to
6% including USO levy for UASLs.
3
Comparison between Access Providers &
Long Distance Operators
• Long distance operators have no obligation for setting up of
infrastructure.
• Access providers have rollout obligations to provide access to the
subscriber: in addition, they incur cost of customer acquisition,
advertisement, customer retention, billing, collection and bad debts.
• Access providers contribute towards teledensity.
• Yet, access providers are subjected to highest license fee.
• CONFUSION : For ILD calls low rate of 6%, but for access providers
it is higher rate varying from 6% to 10%.
• Access providers need the encouragement to cover up the falling
ARPUs.
4
Reduction in Revenue Share License Fee
International Practices
• India has one of the highest tax regimens in the World, and levies must be
reduced to bring them in line with International best practices.
• Such benchmarking with international practices can help India attract more
FDI in the telecom sector.
Pakistan
Sri Lanka
China
India
Regulatory charges
% age of revenue
%age
% age of revenue
% age of revenue
Service tax, GST
GST
VAT
3%
10% + GST
License Fee
0.5% + 0.5% R & D
0.3% turnover (t.o.) + 1% of
capital invested (inv)
Nil
5 – 10%
Spectrum Charge
Cost recovery
~1.1% to t..o
~0.5%* (China
Mobile)
2 ~ 6%**
USO
1.5%
Nil (only on ISD calls)
Nil
Incl in license fees
Total Regulatory
charges
2.5% +GST+ cost
recovery
1.3% t.o.+1% inv+VAT
0.5%+3% (Tax)
17%~26% + GST
* Backbone spectrum charges extra **Est. from Spectrum fees & revenue of China Mobile
5
Reduction in Revenue Share
License Fee
• Reduction in revenue share license fee would not affect government
revenue as with increase of subscriber base, government revenue
also increases substantially.
Rs in Crores
ESTIMATE OF GOVT. LEVIES FROM LICENSE FEE, SPECTRUM FEE &SERVICE TAX ON ALL
TELECOM SERVICES
Year
Gross
Revenue
AGR
License fee
Service tax *
5-10%
Spectrum
Charge 24%
Total Govt.
Levies
2002-03
48000
40800
4080
2040
206
6326
2003-04
61000
51850
4770
4148
434
9353
2004-05
80000
68000
6256
6800
856
13912
2005-06
100000
85000
7820
8500
1530
17850
2006-07
139000
118150
10869.8
11815
2458
25142
2007-08
169000
143650
13215.8
14365
3275
30856
* Rate of service tax taken as 5% upto 13.5.2003, 8% upto 31.3.2005 and 10% thereafter.
• The proposed savings in License fee can be used for growth of rural
telephone services.
6
Reduction in Revenue Share
License Fee
• MOF has stated that:
Quote
A reduction in the absolute amount of these duties and levies shall allow
telecom service providers to plough-back profits into enhancement of network
and services. It is interesting to note that even with a reduction in the license
fee chargeable from telecom service providers, the government can continue to
collect the same revenue. This is so, because license fee is payable by
telecom service provides as a fixed percentage of their revenue. With steadily
rising revenues in the telecom industry, the absolute amount collected by the
government will remain constant even if the percentage revenue share payable
is reduced in a given proportion.
[Source : Strategy Paper of MoF]
Unquote
7
Thank you!
Contact us at
[email protected]
8