Telecom Revenues Likely To Exceed Target By Rs 50,000 Crore In 2019-20

The government could surpass its budgetary target for revenues from the telecom sector for 2019-20 by anything between Rs 13,000 crore and more than Rs 50,000 crore, depending on the fate of the review petition with the Supreme Court, which had imposed a Rs 1.47-trillion bill on telcos in the form of licence fees and spectrum user charges (SUCs).

In its July Budget, the government had targeted more than Rs 50,519 crore in 2019-20 from the telecom sector, an increase of 28 per cent from the previous year, which would mainly come from licence fees, SUCs, and deferred payment for spectrum bought earlier.

Rustling up money for the government is important for it to keep its fiscal deficit in control. Especially as there are clear indications that its target for non-tax revenues from disinvestment in public sector undertakings could fall woefully short. For instance, the government has set up a disinvestment target of Rs 1.05 trillion for FY20 so far, but has managed to raise only Rs 17,364 crore.

With Bharat Petroleum Corporation and Air India off the disinvestment list this year, the target looks unachievable. The delay in the disinvestment plan comes at a time when the government’s fiscal deficit touched 115 per cent of the FY20 Budget estimate in November.

There is more hope from telecom. Based on current estimates the government will continue to get revenues of Rs 21,444 crore from deferred spectrum payment for FY20. However, the adverse impact on this revenue will be felt in the next financial year (2020-21) because the government as part of the relief package has decided to provide telcos with a moratorium on this payment for the next two financial years.

According to estimates by the Cellular Operators Association of India (COAI), the industry is expected to fork out over Rs 17,500 crore this financial year as licence fees and SUCs. The estimate takes into consideration that after flat revenue growth in the initial quarters, it will go up in the last two quarters as a result of telcos increasing tariffs by 15-40 per cent in October last year.

The clincher will be on what decision the court takes on the review petitions filed by the telcos. Analyst say that one scenario could be that the court decides to allow a staggered payment scheme, in which only 25 per cent of the money is paid upfront (like for deferred spectrum where upfront payment ranged from 25 per cent to 35 per cent) and the rest in instalments over few years. In that case the government will get and additional Rs 36,500 crore from telcos, helping them to increase their revenues from the sector to over Rs 75,000 crore.

But some analysts say that prudently only that the dues of Bharti Airtel, Idea Cellular, Reliance Jio and Tatas should be taken into consideration, as the other players have shut shop and left the country or are in IBC. In that case the total dues to be paid upfront based on 25 per cent would be around Rs 24,000 crore. Even then then would be higher than their target by Rs 13,000 crore .

However, in case the court agrees to an upfront payment of 35 per cent, the equation would change dramatically and the additional cash coming to the government would be over Rs 51,000 crore, which would substantially make up for the shortfall in disinvestment.

The calculations do not include what the Department of Telecommunications is planning to demand from non-telcos, based on the same formula as directed by the court. As a result of this, non-telcos, which include GAIL, Power Grid, Railtel, have to fork out over Rs 2.27 trillion. If this decision is upheld, it could resolve most of the government’s fiscal deficit woes.

OPTIONS left for Telcos

• Govt’s revenue based on SC directions for three players — Bharti, Voda Idea and Tata (upfront payment of 25 per cent) — Rs 23,629 cr
• Govt’s revenue based on SC orders paid by all telcos at 25 percent upfront — Rs 36,750 crore
• Govt’s revenue if all telcos pay their dues (at 30 percent upfront payment) — Rs 51,540 crore
• Government’s revenue from non-telcos at 25 percent upfront — Rs 56, 919 crore―Business Standard