The government is set to approve a proposal to slash the licence fee on wired broadband services to a token Re 1 per year per circle, said people familiar with the matter.
Such a move would cut home broadband costs and drive operators such as Reliance Jio Infocomm, Bharti Airtel, Vodafone Idea and state-run Bharat Sanchar Nigam Ltd. to aggressively expand their networks and boost broadband availability.
The Digital Communications Commission, the highest decision-making body in the Department of Telecommunications, recently approved the proposal, which is likely to be sent to the Cabinet this week for its approval.
DoT currently earns about Rs 900 crore annually as licence fees from broadband services, which is paid by operators at 8% of their adjusted gross revenue. Industry experts said gains from wider digital access such as job creation are likely to outstrip the revenue foregone.
Unlike India’s bustling mobile services with 1 billion-plus users, there are a just shade over 19 million users for wired broadband services, according to data from the telecom regulator. BSNL and Bharti Airtel have 8.23 million and 2.43 million broadband customers, respectively. Jio, which recently started home broadband operations, has under a million users.
Experts said reforms such as the planned licence fee cut would make wired broadband services a lot more affordable, boost penetration levels, improve the business case of home broadband, and help attract top dollars from marquee investors.
“Bharti Airtel and BSNL will initially be the big gainers, being the two largest players in the wired broadband space, as the proposed licence fee cut will reduce costs and boost margins,” said Rajiv Sharma, research head at SBICAP Securities.
However, he expects the move to eventually give a shot in the arm to Reliance Jio’s fibre-based home broadband operations and rev up the operations of Jio’s listed cable TV companies Hathway Cables and Den Networks.
BofA Securities said Jio’s fibre-based broadband operations will gain momentum over the next two years and estimates the Mukesh Ambani-led telco will garner 25 million customers, each generating monthly revenue of Rs 700 by FY22, and the business raking in 50% Ebitda margins by then.
The government first considered exempting fixed-line telephony from licence fees in 2008 to encourage telcos to roll out broadband networks in rural areas. In 2015, the Telecom Regulatory Authority of India asked the government to exempt fixed-line broadband service from licence fee for at least five years.
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