New Delhi: Struggling telecom operator Vodafone Idea Ltd has urged the government to set a minimum price of ₹35 for 1 gigabyte (GB) of mobile data, besides ₹ ₹50 a month as connectivity charges, to support a recovery of the telecom sector.
“The root cause of financial stress has been the below cost pricing of telecom services forced by competitive pressures,” Vodafone Idea said in a 25 February letter to the department of telecommunications. “There was some increase in market prices in December 2019 but that is far from enough to cover costs. Further increase in price is unlikely, without a floor price regulation, as the largest data player continues to be priced much lower than other market players,” it said.
The price of 1 GB of mobile data, which stood at ₹226 in 2015 crashed to ₹11 in 2018, according to a Telecom Regulatory Authority of India (Trai) report in August 2019. Vodafone Idea users now pay as little as ₹7.8 for 1 GB per day under its 28-day plan for ₹219, with unlimited calling. Under its ₹249 plan valid for 28 days, 1 GB costs a mere ₹6. In contrast, a basic Jio plan user can access 1 GB of mobile data for just ₹5.
Data costs progressively less as the user moves to higher validity packs.
Vodafone Idea’s suggestion, if accepted, will inflate mobile bills. To be sure, fixing tariffs is the domain of Trai, which has floated a consultation paper on whether there is a need for a floor price. Such a move, if implemented, would mean an end to free services in the sector.
Vodafone Idea said even after ₹35 per GB, 6 paise a minute for voice calls to other networks and ₹50 a month as fixed charges, Indian consumers will still spend less on telecom than anywhere else in the world.
Mint has seen a copy of the letter.
“The industry Arpu (average revenue per user) is likely to touch around ₹225-240, which will still be significantly lower than China, Brazil, Russia and other comparable countries,” the letter said.
Introducing a floor price will double revenues of the sector from the current ₹1.75 trillion, the company said.
This would also ensure that Vodafone Idea generates enough cash to pay its dues to the government, it said.
The court had last year upheld the government’s definition of adjusted gross revenue (AGR), on which it calculates levies on telecom operators. The order dealt a blow to the telecom industry. Vodafone Idea is the worst hit by the verdict with over ₹50,000 crore in past dues.
The company also suggested that licence fee and spectrum usage charges be reduced, and that its goods and services tax credits of ₹8,000 crore be adjusted against its dues. It also requested that after this adjustment, the payment of balance amount of interest, penalty, and interest on penalty be allowed in a staggered manner
It has also requested a moratorium of three years, followed by a payment tenure of 15 years at a simple interest of 6%.
The Digital Communications Commission, which has representatives from DoT, ministry of finance, ministry of electronics and information technology and NITI Aayog, will meet on Friday, following a series of meetings between Vodafone Idea chairman Kumar Mangalam Birla and top government officials.
Birla met telecom secretary Anshu Prakash on 18 February and followed it up by meeting finance minister Nirmala Sitharaman the next day.
After last week’s meetings, the finance ministry and DoT have started discussions on possible relief measures to prevent the telecom sector from becoming a duopoly. Any relief measure would require Cabinet approval.