High taxes, charges limiting investment capacity, says Vodafone
Government should get rid of charges like the USO fund, says Marten Pieters.
NEW DELHI: As it battles a massive Rs 20,000 crore tax case with the
government, British mobile phone giant Vodafone has said that telecom
operators in India face "financial burdens" and other charges — such as
the USO Fund fee and spectrum usage charge (SUC) — which are limiting
their investment capacity.
Marten Pieters,MD & CEO of Vodafone India, said the government should "get rid" of charges like the USO Fund, which he felt holds no relevance in today's times. He also said that penalties imposed for minor violations, including procedural lapses, are very high and should be softened.
The Universal Services Obligation Fund was formed to ensure telecom investments in potentially low-revenue rural and backward areas and companies have to pay nearly 5% of their adjusted gross revenues towards it. Pieters told TOI that private operators have been penetrating rural and other areas at their own initiative and there is no need for the government to charge a separate fee for the same.
"We are by far connecting one of the most rural customers within our network. Of the 174-million customer base of Vodafone, we have 92 million in rural areas. In this scenario, why should we contribute to the fund that was originally meant to connect rural customers. We should get rid of this."
Pieters said taxes, levies and charges, which are imposed on telcos, are limiting their capabilities to invest in network expansion. For example, while Vodafone has invested Rs 60,000 crore on capital expansion and spectrum acquisition over the last five years, its contribution to the exchequer in terms of taxes and other charges amounts to Rs 70,000 crore.
"The financial burden does limit the investment capability. Remember, you can invest a rupee only once. If you pay it to the government on various charges and levies, the network rollout investments may suffer."
Pieters was also critical about the SUC that operators pay to the government (it is 5% of revenues on auctioned spectrum). "When you pay for the spectrum in an auction, then where is the need to pay the SUC. In most of the countries, you pay just an administration fee."
He said the government should charge the SUC on per megahertz holding of operators rather than their revenues. "In the current set-up, operators like PSUs — who have more spectrum but low revenues — pay very little. On the other hand, companies like ours which have higher revenues even on low spectrum holdings have to pay a lot. The current system is very unfair."
Pieters also said telcos face a number of "operational issues" which makes it difficult to expand network. "Getting the right of way is very expensive and difficult to get. Getting approvals for towers is a nightmare. The central government should step in here to sort out these issues."
Marten Pieters,MD & CEO of Vodafone India, said the government should "get rid" of charges like the USO Fund, which he felt holds no relevance in today's times. He also said that penalties imposed for minor violations, including procedural lapses, are very high and should be softened.
The Universal Services Obligation Fund was formed to ensure telecom investments in potentially low-revenue rural and backward areas and companies have to pay nearly 5% of their adjusted gross revenues towards it. Pieters told TOI that private operators have been penetrating rural and other areas at their own initiative and there is no need for the government to charge a separate fee for the same.
"We are by far connecting one of the most rural customers within our network. Of the 174-million customer base of Vodafone, we have 92 million in rural areas. In this scenario, why should we contribute to the fund that was originally meant to connect rural customers. We should get rid of this."
Pieters said taxes, levies and charges, which are imposed on telcos, are limiting their capabilities to invest in network expansion. For example, while Vodafone has invested Rs 60,000 crore on capital expansion and spectrum acquisition over the last five years, its contribution to the exchequer in terms of taxes and other charges amounts to Rs 70,000 crore.
"The financial burden does limit the investment capability. Remember, you can invest a rupee only once. If you pay it to the government on various charges and levies, the network rollout investments may suffer."
Pieters was also critical about the SUC that operators pay to the government (it is 5% of revenues on auctioned spectrum). "When you pay for the spectrum in an auction, then where is the need to pay the SUC. In most of the countries, you pay just an administration fee."
He said the government should charge the SUC on per megahertz holding of operators rather than their revenues. "In the current set-up, operators like PSUs — who have more spectrum but low revenues — pay very little. On the other hand, companies like ours which have higher revenues even on low spectrum holdings have to pay a lot. The current system is very unfair."
Pieters also said telcos face a number of "operational issues" which makes it difficult to expand network. "Getting the right of way is very expensive and difficult to get. Getting approvals for towers is a nightmare. The central government should step in here to sort out these issues."
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