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    DoT pares telecom revenue estimate by 70% to Rs 40,000 cr

    Synopsis

    The govet expects to net around Rs 40,000 crore from telecom sector this fiscal, less than a third of the budget estimate of Rs 1.33 lakh crore, mainly due to the absence of 5G airwaves in next auctions and limited payments towards past AGR dues.

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    The government estimates Rs 20,000-22,000 crore at best to flow in by way of licence fees and spectrum usage charges (SUC) this fiscal.
    The government expects to net around Rs 40,000 crore from telecom sector this fiscal, less than a third of the budget estimate of Rs 1.33 lakh crore, mainly due to the absence of 5G airwaves in next auctions and limited payments towards past AGR dues.

    In the absence of premium 5G airwaves from the upcoming March sale and likely limited appetite, the telecommunications department (DoT) expects a maximum of around Rs 10,000 crore as upfront payments this fiscal, which signals overall proceeds of around Rs 40,000 crore under the communications head, said government officials familiar with the matter.

    Further, payments towards the past adjusted gross revenue (AGR) dues are likely to be a modest Rs 1,000 crore.

    “The initial (revenue) estimates of Rs 1.3 lakh crore had taken a 5G spectrum auction and AGR dues into account,” a senior official told ET. “But it does not look like the telcos are paying anymore AGR dues till this fiscal gets over.”

    Telcos are expected to make an upfront payment of only around Rs 10,000 crore in the upcoming auction where spectrum worth Rs 3.92 lakh crore will be sold at base price, the official said.

    The government estimates Rs 20,000-22,000 crore at best to flow in by way of licence fees and spectrum usage charges (SUC) this fiscal. It also expects to pocket around Rs 5,000 crore as miscellaneous charges, making up an estimated Rs 38,000-40,000 crore revenue receipts from communication services this fiscal.

    A key reason behind the slippage in the government’s telecom revenue estimates in the likely shortfall in AGR collections this fiscal as the telcos, including , and Tata Teleservices (TTSL) have paid the larger instalments last year.

    For instance, the DoT will only net a Rs 1,000 crore in FY21 from Vodafone Idea towards AGR dues payments as the telco had paid Rs 6,854 in three tranches in the previous fiscal. Airtel had also shelled out Rs 18,004 crore towards AGR dues last February while TTSL had paid Rs 4,197 in two tranches in February/March, 2020. Accordingly, these payments won’t reflect in DoT’s AGR collections for FY21.

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    The estimated Rs 20,000-22,000 crore collections by way of licence fees and SUC in FY21 is by roughly annualising the near Rs 4,900 crore collected in the June quarter, and assuming that the revenue mop-up on these counts will be slightly higher in the second, third and fourth quarters, on the back of a strong revival in mobile broadband customer additions and data consumption, after easing of Covid-19 lockdown restrictions, experts said.

    A back-of-the-envelope calculation, though, shows that when initial government revenue estimates from communication services were drawn up, it included the potential sale of 5G airwaves in the 3,300-3,600 MHz bands at a suggested base price of Rs 492 crore per unit.

    But in the recently released notice inviting applications (NIA) – the auction rules document – DoT has said it will sell 2,250 MHz of 4G airwaves across seven bands - from 700 MHz to 2,500 MHz bands. The government is yet to clear the air on when 5G airwaves will be auctioned although it is widely expected later this year.

    Analysts expect Reliance Jio Infocomm, the sole profit-making telco at present, to be the main spectrum buyer in the March sale, spending close to Rs 20,000-30,000 crore, followed by Airtel, which is likely to spend around Rs 10,000-15,000 crore.

    “With fewer operators in the system and Vi unlikely to bid much, we don’t see aggressive bidding in these auctions, and we also don’t expect much activity in the 700 MHz auction, unless Jio decides to build some capacity for a potential 5G rollout this year,” Morgan Stanley said in a note seen by ET.

    Analysts said final winning bids across spectrum bands are likely to be close to the reserve prices, given the large spectrum supply and likely limited demand for expiring airwaves.

    A senior telecom analyst said the government won’t see any additional revenue inflows by way for deferred spectrum payments this fiscal as the Cabinet had back in November 2019 cleared a two-year moratorium on such payments to offer relief to the financially stressed sector that is saddled with more than Rs 8.55 lakh crore of debt.
    ( Originally published on Jan 14, 2021 )
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    1 Comment on this Story

    Ajinkya Taware48 days ago
    With high spectrum charges, Modi killed the vibrant telecom sector. We had 6-7 major national players and now we only have 3. High taxes only support the incumbent players while hurting the newer challengers. The welfare state of India is killing the golden goose that gives the golden eggs.
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