Government revenue estimate – disaster for telecom companies

As the government shows its budgetary estimate, Telecom operators and analysts failed to understand it. The government will not include adjusted gross revenue (AGR) dues or part of dues. This will not give that certain benefits and thus telecom operators are unable to understand the budget estimation.

According to telecom operators and analysts, they will fetch high revenues. They will generate Rs 40,000 -50,000 crore by their spectrum auctions, Rs 20,000-25,000 as license fee and by spectrum usage charge. Overall they will earn around Rs 75,000 crore. But this amount is very different from the government estimate of 1.33 lakh crore for 2020-21.

Rajan Mathews, director-general of Cellular Operators Association of India (COAI) which constitutes Bharti Airtel, Vodafone Idea and Reliance Jio Infocomm. He said that they can’t interpret that why the government has doubled the expected revenue from the telecom sector. 

The budget amount for communication is Rs 50,519.8 crore and the expected returns are of Rs 58,686.64 crore. The government raised its estimated revenue by Rs 1, 33,027.2 crores which left telecom sector puzzled

Supreme Court order of October 24, 2019, has led telcos to great trouble. They have to pay Rs 1.47 lakh crore on account of license fees, spectrum usage charge, interest and penalties. Vodafone Idea have to pay Rs 53,000 crore, Bharti Airtel has to pay more than Rs 35,000 and Tata Teleservices have to pay around Rs 14,000. To this, these companies filed a petition with the purpose to negotiate money and time frame for payment.

Rajiv Sharma, head of research at SBICap Securities said that there are huge expectations for revenue from 4G and 5G auctions. The next auction with 8,293.95 MHz of airwaves is expected to be India’s largest auction. The total estimated base price is around Rs 5.77 lakh crore. Some industry executives said to this that less enthusiasm is shown in 5G auction and hence it will bring the value of about Rs 3.5 lakh crore.

The airwaves are estimated to be sold in the first quarter of next fiscal but even payment of 20-25% will bring a net worth of around 40,000-50,000 crore. 

The only option left with the Department of Telecom to attain its aim for FY21 if it indulges AGR of at least Rs 40,000 crore. Apart from it the government should include AGR payment of Rs 20,000-25,000 to achieve its goal.

Supreme Court should offer some relief to telcos otherwise there would be a great loss and may lead to their shut down. All this could lead to some rush for the 4G spectrum in the nearby auctions. The executives said that after all this, the results will look optimistic.

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