India has rewritten some of its telecom laws to make it easier for foreign investment and to reduce huge backward tax bills that threatened to send some operators to the wall.
The main structural reform described yesterday by the Indian government involves changes to an Adjusted Gross Income Tax (AGR) of carriers which offers carriers the option of sharing revenues with New Delhi rather than paying fees for licensing of carriers. ‘exploitation. Mobile operators, however, were taxed on revenues from services such as spectrum usage fees charged to peers, which they considered unfair as the AGR had previously been applied to revenues from telecommunications services from peers. based. Disputes over the legality of the tax have spent nearly a decade in court, and when a decision was finally made by the government, it included non-essential revenue and left carriers owed $ 22 billion. tax arrears.
Most of these responsibilities fell on the former carriers Vodafone Idea and Bharti Airtel, who fought vigorously against the law. Vodafone Idea even struggled to find investors to recapitalize its operations, due to its AGR debts.
The government has now acceded to the carriers’ wishes by removing non-essential revenue from the definition of the AGR and allowing a four-year moratorium on payments. The government has also reduced by 80% the bank guarantees that telecom operators must put in place to guarantee AGR and license payments. Bank guarantees are indeed a handicap, so their reduction makes Indian telecommunications operators a better target for investment.
According to the government’s announcement, the reforms “should stimulate the proliferation of 4G, inject liquidity and create an environment conducive to investment in 5G networks” and help telecom operators as they “will bring relief by facilitating liquidity and cash flow.
“It will also help various banks with substantial exposure to the telecommunications sector,” the announcement concludes.
The reforms will also help the storage, digitization and document management industries, as another change allows carriers to move from paper customer acquisition forms to digital records. The government’s announcement estimates that Indian carriers currently store between three and four billion of these paper documents. Â®