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Telecom companies avoid free calling and cheap data due to losses

Thursday - November 21, 2019 2:18 pm , Category : BUSINESS
Telecom companies going to increase tariff plan
Telecom companies going to increase tariff plan

... So now forget about free calling and cheap data tariff on mobile! 

NOV 21 (WTN) - There was a time when talking on mobile phones and mobile Internet data in India was quite expensive. But, after the launching of Reliance Jio in the year 2016, a revolutionary change took place in the Indian telecom sector. Jio's free calling and cheapest mobile data led to a record increase in smartphone sales in India. On a record time, SIM of  Reliance Jio started to be found in every mobile phone. The business of other telecom companies has been adversely affected since the Jio blast, and these companies have also had to make a historic decline in calling and data prices to compete with Jio and save their existence. 

But Jio, with its free calling and cheapest data tariff, managed to gradually make its way into the telecom sector. And to date, Jio Telecom has the largest number of consumers in India. Due to the historical challenge from Jio and the masterstroke of Jio, the remaining telecom companies of the country have suffered a huge loss and these companies could neither compete nor meet their losses even after best efforts.

Indian telecom consumers, who have become addicted to free calling and cheap data, may now be shocked to know that soon they will have to pay for calling and the data, and data is also going to be 15 to 20 percent more expensive than before. Telecom companies, like Vodafone Idea and Airtel, are going to increase their tariffs from December 1, after Jio has stopped free calling from Jio to other networks. As you are aware, recently Reliance Jio has started taking money for Non-Jio calling, citing Interconnect User Charge (IUC). At the same time, all telecom companies are suffering huge losses due to problems like Adjusted Gross Revenue (AGR), and this is why talking on mobile and using data is going to be expensive.

Vodafone Idea has suffered the biggest loss in Indian corporate history in the competition of free calling and cheap data with Jio. Therefore, currently, telecom companies are trying to increase their income to some extent by increasing tariffs. However, even though the tariff of Reliance Jio is still cheaper than the rest of the companies. In such a situation, other telecom companies are incurring daily losses of crores every day.

But if other telecom companies raise their tariffs to some extent to meet the deficit, it is natural that their customers may attract toward Jio. In fact, since the launch of Jio, the financial condition of big telecom companies like Airtel and Vodafone Idea has deteriorated significantly, because these companies could not compete with Jio's strategy of free calling and cheap data.

Corporate competition from Jio is hurting other telecom companies, but the real waste of telecom companies is the Adjusted Gross Revenue (AGR) charged by the central government. It is said that due to this tax, telecom companies are on the verge of being bankrupt. This loss is so much that telecom company Vodafone Idea has incurred the biggest ever loss of Rs 50,921 crore in the second quarter of the current financial year, which is the biggest loss in Indian corporate history. Airtel has incurred a huge loss of Rs 23,045 crore in the July-September quarter of the current financial year.

Now you must be wondering what is this AGR i.e. Adjusted Gross Revenue and why it is collected from the telecom companies? So we tell you in detail about it. Actually, Adjusted Gross Revenue (AGR) is the usage and licensing fees charged on the telecom companies by the Department of Telecommunications (DoT) of the Ministry of Communications. It has two parts, one part is the spectrum usage charge which is 3 to 5 percent, and the other part is the licensing fee, which is around 8 percent.

Regarding AGR, the Department of Telecommunications says that AGR should be calculated based on the total income or revenue of a telecom company, including income from non-telecom sources such as deposit interest and asset sales. But at the same time, the reasoning of telecom companies is that AGR should be calculated only on the basis of income from telecom services.

When this matter reached the Supreme Court, then the court in its order dated October 24, 2019, upheld the stand of the Department of Telecommunications. In its judgment, the Supreme Court has allowed the Department of Telecommunications to recover about Rs 94,000 crore as AGR from the telecom companies. Airtel will have to pay Rs 43,000 crore under this and Vodafone Idea Rs 40,000 crore and the last date for this is 24 January. However, if interest and penalty are added to it, then this amount increases to Rs 1.3 lakh crore.

Now as the government collects AGR from the telecom companies, due to which the burden of the telecom companies increases and they are incurring losses. In this regard, the Vodafone Idea says that due to the difficulty of the telecom sector, the increase in tariff has become a necessity. This means that the financial condition of the telecom companies was already bad due to the challenge from Jio and other reasons, the decision of the Supreme Court to recover the AGR has proved to be a major setback for the companies. Now, due to the continuous losses, telecom companies have to provision for AGR, it means companies have to set aside a fixed amount for this.

This means that telecom companies can no longer continue the policy of free calling and cheap data due to many challenges and problems. If the already loss-making telecom companies did not increase the tariff, then in the coming days, these loss-making companies could declare bankruptcy to it selves. In such a situation, you may not get the benefit of free calling and cheap data now, because of the financial condition of loss-making telecom companies are not such that they can continue it now.