Telecom Future Tense: More service tax and processing fee, less profit for mobile operators

Telecom Lead India: Union Budget 2012 is out and the
government has raised service tax by 20 percent. The current rate at which
consumers will be charged is 12 percent. This will have a huge impact on
customers and enterprises as most services, including mobile calls and other
telecom services, will cost more. Moreover, telecom companies want to raise the
processing fee charged on mobile phone top-up vouchers to Rs 3 from Rs 2.

Service tax, along with the processing fee will increase
in call rate and lower per-minute usage per user, thereby impact operator
revenue negatively.

However, TRAI recently has invited comments on combo
vouchers that will provide customers with options of availing benefits of
various other offers available under single recharge.

COAI and AUSPI, lobby groups
of GSM and CDMA players respectively, contended that there have
been inflationary pressures over the last three years, since the ceiling of Rs
2 was prescribed by TRAI. 

However, they would need to pay extra on the actual
charges of these services that are termed as processing fee. 

Commenting on the service tax rate hike, Satya N.
Gupta, chief-Corporate Affairs, Telecom Infrastructure Business, Sterlite
Technologies, told Telecom Lead, “Afordability of the consumer will
come down. It may affect the per minute usage of the operators and may result
in to marginal drop in revenue of operators. 20 percent increase in service tax
will boost the revenue of government.”

Indian telecom operators profit to decline 85% in 2011-12

Profit after tax of Indian telecom services segment is
expected to decline 85 percent in 2011-12, according to India Government’s
Economic Survey. The report said the significant decrease in profit is mainly
on account of the sharp rise in the industry’s interest outgo and higher
depreciation charges due to the heavy borrowings for acquiring 3G licences and
rolling out 3G services.