Moratorium on telecom dues allows time to transform, repair; tariff wars unlikely: Deloitte India

#Business, #Deloitte India

The four-year breather from payment of regulatory dues offered as part of the telecom relief package allows operators time to transform and repair, and may cool off price wars, according to a senior analyst at Deloitte India.

The reforms send out a strong message to the global community, and are expected to bolster confidence of investors and lenders in the telecom sector, Peeyush Vaish, Partner and Telecom Sector Leader, Deloitte India said.

The Union Cabinet recently approved a blockbuster relief package for the stressed telecom sector that includes a four-year break for companies from paying statutory dues, permission to share scarce airwaves, change in the definition of revenue on which levies are paid and 100 per cent foreign investment through the automatic route.

The measures, aimed at providing relief to companies such as Vodafone Idea Ltd (VIL) that have to pay thousands of crores in unprovisioned past statutory dues, also include the scrapping of Spectrum Usage Charge (SUC) for airwaves acquired in future spectrum auctions.

“The four-year timeframe is good enough period to sort out industry’s issues on pricing,” Vaish told PTI. Operators have four years to transform themselves, which is significant. Players are competent enough to transform themselves, he said.

“I expect that all operators will be able to sort out their costs and margins, over the next four years,” he said. Telcos will “shape up” in coming years, and go in for course correction, where needed.

“Total of four-year moratorium means, about three years post 5G launch and that is a good enough period for any organisation to transform, restructure and come out of current challenges,” he said.

Telecom Minister Ashwini Vaishnaw recently said the 5G spectrum auctions will “most probably” be held in February 2022, and the government may even try for a January timeline.

Deloitte’s Vaish believes that the slew of reform related announcements have now significantly lessened the chances of duopoly in the market and price wars are expected to subside with telcos likely to train their sights on profitability and margins.

This is likely to continue even as the market enters 5G era. This is likely to continue even as the market enters 5G era.

“I don’t expect a price war on 5G services for capturing subscribers, either. Operators are sensible and have realised that bloodshed will not help anyone. So that will significantly lessen chances of a duopoly, and price wars will also reduce,” he said.

That said, sudden and substantial hike in tariffs overnight seems highly unlikely, he predicted. That said, sudden and substantial hike in tariffs overnight seems highly unlikely, he predicted.

Operators may continue to skim off the bottom or base plans, and attempt to get more ‘wallet share’ through wide range of services. As such, AGR re-definition has paved the way for bundling of more non-telecom products like OTT, games, devices.

They may also trade monthly plans for quarterly offerings for securing a greater commitment from subscribers. They may also trade monthly plans for quarterly offerings for securing a greater commitment from subscribers.

“Operators are not likely to do anything drastically different, and instead will focus on retaining market share. The strategy will shift to focus on 5G auctions and retaining subscribers,” Vaish said. Vaish dismissed concerns over any possible cartelisation in the market in coming months as dust settles down and sector returns to stability.

“There is no cartelisation in the industry. It is the question of demand and supply, and what works best for operators,” he said. Easier terms on spectrum sharing will have a sobering effect on upcoming 5G auctions, lowering chances of over-the-top, aggressive bidding, he said.

Also operators may not bid for all bands in 5G auctions and, instead, will choose what is best for them. This is because, spectrum will continue to be available subsequently with new reforms now in place, according to him.

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