Telecom sector disappointed

MUMBAI, JUNE 1: In spite of allowing provident funds to invest 10 per cent of their new accruals in private infrastructure projects having i...

MUMBAI, JUNE 1: In spite of allowing provident funds to invest 10 per cent of their new accruals in private infrastructure projects having investment grade rating from two credit rating agencies, the telecom industry seems to be disappointed as crucial issues such as reduction of duties on handsets from their present level of 53 per cent and on telecom software from 40 per cent to zero have not been addressed.

To add to the woes of the industry, the budget had included Rs 2,800 crore as non-tax revenue receipts as licence fees from basic and cellular operators.

According to the industry, while on one hand the budget proposals have opened up a new avenue for financing by being able to tap the provident funds, there has been no move to alleviate the state of the industry.quot;We are deeply disappointed by this budget as there has been no support for us in this. It has only made our survival more difficult,quot; said TV Ramachandran, executive vice chairman, cellular operators association of IndiaCOAI.

According to Ramachandran, by budgeting Rs 2,800 crore as revenues from payment of licence fees by basic and cellular operators, the financial health of the operators will be badly affected. quot;Even last year the defaults on licence fee payments by the cellular operators remained high at 50 per cent or Rs 1,000 crore. This year it will be more difficult for the government to collect the licence fees as the operators have no money,quot; he said.

According to the industry, core issues that will help have not been addressed. quot;The thrust given to information technology is sadly missing in telecom, especially at a time when the two are converging,quot; said an industry analysts.

According to the industry, as the duty on handsets have remained unchanged at a total of 53 per cent and the duty on telecom software being reduced marginally from 40 to 30 per cent, one can8217;t expect any major growth due to the budget which would have helped the industry.

quot;As long as the projects remain unviable creating new avenuesof finance will not help as nobody will be willing to invest in them,quot; pointed out an industry observer adding that saying it will be virtually impossible for cellular companies to get investment grade rating from the credit rating agencies. He added that while the metro cellular operators might not face such a big problem, for the circle operators the problem will be more acute.

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quot;It will only further delay financial closures which anyway very few companies have been able to achieve,quot; said Ramachandran.