More pain for already bleeding Telcos
Telcos have already been struggling with the recent call dropping charges proposal and highly priced spectrum, finance minister has further aggravated the situation by proposing levying 15% service tax on all spectrum allotments. Recent updates of Airtel selling its major operations in South-Africa & merging its operations in Sr-Lanka with local telcos, indicates how much bumpier road can get for a Telecom Industry which is already reeling under debt burden of approximately Rs 3,50,000 crores.
The main reasons exhibiting a bleak future & casting shadows over telecom industry are:
Government has been giving ultimatum to companies to levy call dropping charges causing revenue loss to already bleeding telecoms.
Highly priced 4G spectrum, even goliaths are fearing that such price may hinder telecom industry’s growth in the long term.
Survival of small players in the industry has been endangered.
High debt costs and lower margins are wiping out cash profits out of the telecom industry.
Unprecedented raise in the tariffs, burning hole in the common man’s pocket.
We appreciate the Finance Minister’s vision of taking maximum utilisation of indirect tax base, but after sliding on ease of doing business index, we should focus more on how to achieve yield and capital appreciation based tax and procedures friendly economy. Levying of further taxes may bring in laud for the finance ministry, but it will further lead to more borrowings from banking institutions by an industry which is already debt-ridden.