In Short:
The telecom industry is asking the government to lower the license fee from 8% to between 0.5% and 1% of their total revenue. They argue this reduction would allow companies to invest more in network upgrades, improving digital access, especially in remote areas. The Cellular Operators Association of India believes the current fees are outdated since spectrum is now auctioned separately from licenses.
The telecom industry is advocating for a significant reduction in the license fee paid to the government, proposing a decrease from the current rate of 8% of gross revenues to a range of 0.5% to 1%. This request is rooted in the evolving circumstances and regulatory environment affecting the industry.
The reduction in fees is seen as a step that would allow telecom operators to reinvest their revenues back into network upgrades and expansions, thereby promoting digital inclusion.
The Cellular Operators Association of India (COAI), which represents all three major private telecom operators—Reliance Jio, Bharti Airtel, and Vodafone Idea—has stated that the payments made based on Adjusted Gross Revenue (AGR) need to be reassessed in light of the current industry landscape. At present, the license fee includes a 5% universal service obligation (USO) levy.
The operators have pointed out that the rationale for the license fee was relevant when licenses included spectrum allocation. However, this changed in 2012 when spectrum was decoupled from the license, and is now assigned through a transparent auction process.
“With the separation of spectrum from the license and assigning it at market price, the justification for imposing a license fee effectively ceased to exist long ago. The license fee should primarily cover administrative costs, estimated to be around 0.5% to 1% of gross revenues, rather than the existing 8%,” stated COAI Director General SP Kochhar.
The telecom operators assert that both the government and telecom regulators acknowledge the challenges posed by low returns within the industry, as noted by several officials during the recent India Mobile Congress.
COAI further emphasized that telecom companies not only bear the telecom-specific AGR-related expenses but also contribute to Corporate Social Responsibility (CSR), Goods and Services Tax (GST), and corporate taxes, similar to companies in other sectors. This financial burden positions telecom businesses at a substantial disadvantage compared to other industries, thus constraining their capacity to invest in ongoing technological advancements.
The industry believes that either abolishing or reducing license fee payments would enable telecom operators to reinvest their revenues significantly into network enhancements and expansions. This would accelerate digital inclusion, particularly in remote regions, ultimately benefiting the everyday lives of individuals.
“With the overarching promise of 5G and advancements beyond, which aim to connect and empower various industries, we urge the government to consider our request for the abolition or reduction of AGR-related fees at the earliest opportunity,” concluded COAI.
