No licence fee for fixed-line telephony

BSNL set to be biggest beneficiary with expected savings of Rs 1,200 crore.

The government has decided to exempt companies offering fixed-line telephone services from the license fee, which is paid on the adjusted gross revenue AGR, telecommunication 038; IT minister A Raja said on Friday. The decision is expected to cost the exchequer over Rs 2,000 crore.

8220;I have already asked the telecom commission to deliberate on the issue to exempt fixed-line telephony from the licence fee,8221; Raja said. Telecom companies operating in circle A and metros pay 10 per cent of AGR as their licence fee, while those in circles B and C pay 8 per cent and 6 per cent respectively.

The biggest beneficiary would be state-run BSNL, 90 per cent of whose revenue accrues from fixed-line services on a subscriber base of around 31 million. According to estimates, BSNL8217;s saving is expected to be to the tune of Rs 1,200 crore. Sister PSU MTNL has a subscriber base of around 4.5 million. Private players Bharti Airtel Ltd, Reliance Communications Ltd and Tata Teleservices Ltd have a subscriber base of around 3.5 million. The three private telecom operators annually pay roughly Rs 700 crore in licence fees on their AGRs.

The government8217;s move comes at a time when the country has emerged as the second largest in terms of mobile subscribers, but fixed-line telephony8217;s performance in terms of both urban and rural subscriber additions has been dismal, said an industry expert.

Explaining the government8217;s rationale, Raja said fixed-line density was skewed 8212; despite a teledensity of 25 per cent, over 70 per cent of rural India still didn8217;t have connections, and he hoped that his decision would encourage private telecom operators to go to the hinterland.

Bharti Airtel chairman and managing director Sunil Bharti Mittal said, 8220;I am delighted. Fixed-line telephony must become a recipient of funds and operators should not be burdened with a host of levies like a licence fee or contribution to the Universal Service Obligation Fund.8221; Added a Mumbai-based analyst: 8220;As far as competition is concerned, there is no attractive factor in fixed-line telephony. The investment is high and income will be low as there is no potential growth.8221;