Telcos get a tough call from Trai

NEW DELHI: In a major setback to telecom operators, Telecom Regulatory Authority of India (Trai) suggested on Thursday that the revenue earned from the sale of handsets bundled with a tariff plan should be included in the adjusted gross revenue (AGR).

Telecom operators pay a an amount, ranging from 6% to 10% of their adjusted annual revenue, to the government. Telecom operators want all non-service revenues to be removed from the definition of AGR.

“We have not yet seen the Trai recommendations. Therefore, we are not in a position to comment,” said TV Ramachandran, secretary general of Cellular Operators Association of India (COAI). Trai has however said that the revenues from all discernible and standalone sale of handsets or telecom equipment not bundled with telecom services should be excluded from AGR.

The regulator has also recommended that service tax is not a revenue for the service provider, which is only a collecting agency on behalf of the government. The inclusion and exclusion of this item should be on accrual basis, it said.

On interconnection charges, Trai said it is a pass-through revenue and the service provider is only collecting interconnect usage charge on behalf of other service providers. Therefore, the regulator said, the inclusion and exclusion of this item in AGR should be on accrual basis. Trai said the this will make these two items easily verifiable from the annual accounts.

Although the income from dividend is part of the revenue, it cannot be construed as revenue from the licensed activity and therefore should not be included in AGR. As dividend income is separately stated in the annual accounts of service providers, there would be no difficulty in verifying its correctness, Trai said.

Trai has also said that the revenue from TV uplinking services and internet services should be part of AGR. But payment for port charges, leased-line charges, bandwidth charges, rent for sharing of infrastructure or any other payments to other licensees should not be deducted from AGR, it said.

Trai said bad debts should not be excluded from the AGR. Similarly, only interest calculated on refundable deposits should be added to the AGR, instead of adding the entire interest earned.

For the licence fee payable in first half of the financial year, the prevalent interest rate on April 1 and for payments in second half of the year the applicable rate on October 1 can be made applicable. Trai has also recommended that the income from dividend should not be included in AGR.

On capital gains on account of profit on sale of assets and securities, the telecom regulator has recommended that the revenue from sale of immovable property, securities, warrants or debt instruments and other fixed assets should not be part of AGR, unless there is verifiable data. It also said that any revenue due to forex fluctuations should not be part of AGR.