New Delhi: In 2008-09, Indian mobile telephony firms added around 131 million subscribers. The revenue of India’s top mobile firm Bharti Airtel Ltd increased by 36.76% over the previous year to Rs36,961.50 crore. And the department of telecommunications (DoT) collected around Rs13,000 crore from the telcos as licence and spectrum fees, up 17-18% from the previous year.
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Telcos in India pay the government a percentage of their adjusted gross revenue (AGR) in order to offer telecom services in the country as well as for spectrum allocated to them. The companies pay between 6% and 10% of AGR as licence fee and another 2-6% as spectrum charges, based on where they operate.
To be sure, pitting growth rate in revenue of telecom companies against that of the share earned by the government isn’t a straight comparison, because this payment is based on AGR.
India is the world’s fastest growing and second largest telecom market. In 2007-08, the country saw the addition of 95.98 million subscribers. That year, the government collected Rs11,003.03 crore from telcos in the form of licence fee and spectrum fee—an increase of 29% over the Rs8,472.4 crore collected the previous year.
The numbers are also significant because DoT is the second highest revenue earner for the government after the taxes earned by the government.
On the recommendations of the Telecom Regulatory Authority of India (Trai), the country’s telecom regulator, DoT has ordered a special audit to examine the books of Reliance Communications Ltd (RCom) after allegations from Mumbai-based brokerages that the telco was passing off its income under different headings in order to pay lower revenue to the government.
DoT has also appointed auditors to examine the books of Bharti Airtel, Vodafone Essar Ltd and Idea Cellular Ltd to check for discrepancies in their reporting. An audit of Tata Teleservices Ltd has been deferred due to the unavailability of an empanelled auditor.
“We are waiting for the reports from the auditors to see whether there has been any loss to the exchequer due to arbitration,” said the DoT official quoted in the first instance. “Collections have also come down somewhat due to some exceptions that were given to the operators as per the ruling of TDSAT on 30 August 2007.”
On 30 August 2007, TDSAT (Telecom Disputes Settlement and Appellate Tribunal) had ruled that income from dividend, interest on savings, capital gains and gains on foreign exchange transactions should not be part of AGR.
“The auditors have been asked to check the treatment of the various streams of revenue by the operators. They are supposed to report all revenue that accrues to them directly as AGR. But they have been saying that revenue from things such as the sale of handsets, among other things, should not be included as they are not making any money from the sale,” the DoT official added.
“There are other revenue streams that we have the auditors to look into the treatment of. These include revenues from hived-off tower businesses and those from bulk SMSes, which are done through a third party or their own ISPs (Internet service providers),” he added.
Several telecom companies have spun off their physical infrastructure—towers through which mobile signals are transmitted—and found investors for these firms. These tower firms service not just their parent telcos, but others as well.
There is scope for telcos to get away with paying a lesser share of their revenue to the government than they should have, said one expert.
“Telecom fees in India are charged in a very similar manner to taxes. The room for revenue fudging is considerable, as is the incentive to fudge, considering the billions in revenues that we are talking of,” said Mahesh Uppal, director at Com First (India) Pvt. Ltd.
Still, it didn’t make sense to try to correlate the number of users added with the growth in revenue, he said.
“The rate of growth in revenue is bound to fall considering the new consumers being added are marginal users. The revenue they generate is not very much,” Uppal added.
An executive at a telco said that while “the growth in the market continues to be fantastic, the growth rate is bound to come down”.
“One of the reasons that the rate of revenue growth may have fallen is the larger base on which it is being calculated. It is bound to be lesser as a percentage of the overall revenue collection,” added this person, who heads a large telco and asked not to be identified.