Mittal rues high levies in telecom; says sector taxed just like tobacco industry

New Delhi: Telecom czar Sunil Bharti Mittal Thursday said consolidation in Indian telecom sector has come about at "significant pain" of nearly USD 50 billion of investment write-off and job losses, and went on to flag high taxes that the sector faces.

Speaking at the inaugural session of India Mobile Congress 2018, Mittal who is the Chairman of telecom major Bharti Airtel, rued that the telecom sector remains highly taxed just like the tobacco industry, when it is contributing to India's digital aspirations.

"In India, for every Rs 190 that mobile operators earn, nearly Rs 37 goes towards one form of levy or the other. I cannot see how this contradiction can exist...where on one hand we have PM's vision of digitally enabled India ...which requires tremendous amount of investment, on the other hand we keep the spectrum prices and our licence fee very high...and of course the GST is at 18 per cent which almost at the highest tax bracket," Mittal said.

This needs to be resolved, Mittal said, adding he is happy that the National Digital Communications Policy (NDCP) captures the outstanding issues like doing away of dual taxation, accelerating Merger and acquisition process, and reducing litigation in the sector.

He also said the industry has now reached the "right structure" but noted that the consolidation of the Indian telecom market did not take place in an orderly manner except in case of Vodafone Idea merger.

"Many operators had to go through significant amount of pain and job losses, nearly 50 billion dollars has been written off and now we have arrived to a point where we are in the right industry structure," Mittal said.

He said telecom markets globally are moving towards having 2-3 operators and added that in India, too, consolidation had paved the way for three private players and one state operator to cover over 1.2 billion people.

"As all of you are aware, the mobile industry is a heavy capital intensive industry, which requires continuous change of technology, requires laying of fibres, putting towers, so that we can reach the customer," he said.

Mittal said that the National Digital Communications Policy, like the previous telecom policy, clearly acknowledges that revenue maximisation is not the objective.

"There is an overarching objective of the earlier national telecom policy and now also enshrined in the NDCP that revenue maximisation is not the objective. Then the question is why the industry and Department of Telecom are in hundreds of litigations around only one objective of revenue maximisation," Mittal said.

The industry is gearing up for 5G roll out and will "deliver" results just as it has over the last 24 years, Mittal said, but added that spectrum prices and charges need to be reasonable and affordable, and incidence of high taxation needs to be addressed.

It is pertinent to mention that established operators like Bharti Airtel, Vodafone Idea Ltd are in the midst of a bruising tariff war following the entry of Reliance Jio, backed by India's richest businessman Mukesh Ambani. Jio's free voice and dirt-cheap data offering have dented the financial metrics of incumbent operators, deepening the impact of regulatory decisions like cut in termination charges, even though the market is growing at a scorching pace.

Mittal said that over the last one year India has embraced technology with both hands.

"Today, we have over 450 million mobile net users and are increasingly adding millions of them almost on weekly basis," he pointed out.

India, he observed, has also been able to attract manufacturing in the telecom sector and many mobile handset players have set up manufacturing base in the country.

"India still needs to ensure that we have fundamental manufacturing shifting to India with more chip set manufacturers, more components makers coming here and that is something which normally follows when the local production starts," he added.