The Indian budget for 2008-09 was expected to rationalise the taxes and duties applicable on the telecom sector. But the industry is dissatisfied with the proposals.

Business paper Mint, has a sectoral analysis of telecom.

Proposals: Customs duty on project imports attracting 7.5% proposed to be reduced to 5%; Customs duty on specified raw materials and inputs for use in IT/electronic hardware industry proposed to be reduced from 10%/7.5% to Nil, on end-use basis; National Calamity Contingent duty (NCCD) at the rate of 1% proposed to be imposed on mobile phones. On imported mobile phones, this duty shall be levied as additional duty of customs;

Impact: In view of the low telephone penetration in India, reduction in customs duty on project imports and on specified raw materials and inputs for use in IT/electronic hardware industry likely to reduce per-line capital costs and make telecom services more affordable.

TechTree has a sectoral analysis of IT.

Excise duty on wireless datacards reduced from 16 percent to nil.

Increase in grant of Rs 180 crores to the Department of Information Technology, and allocation of funds to set up Broadband-enabled service centers in rural areas. Allocation of Rs 1,680 crore (from an earlier 1,500 crore) to the Department of Information Technology in 2008-09 while allocated funds to set up 100,000 Broadband Internet-enabled Common Service Centers in rural areas, State Wide Area Networks (SWAN), and for a new scheme for State Data Centers. Rs 75 crores wil be provided in the next financial year to the common service centers; Rs 450 crores have been allocated to SWAN, while Rs 275 crores have been granted for the State Data Centres.

Zero customs duty on Set-Top boxes

The finance minister also announced that specified parts of set-top boxes and specified raw materials for use in the IT/electronics hardware industry would be exempt from customs duty. This could mean a drop in prices of set-top boxes as well as TV, DVD players, etc. Add to it, customs duty on convergence products to be reduced from 10 percent to 5 percent.

Also Read: Telecom set for tax overhaul

Speaking to IIT alumni in Silicon Valley, Vodafone chief executive Arun Sarin said his hopes that India’s regulatory bureaucracy had modernised were shaken by last-minute moves to derail his company’s $11-billion takeover of Hutchison Essar.

“I really did not expect people—the ‘good and great’ of India—to be calling cabinet secretaries and ministers to say ‘You have to unwind this deal because we want a piece of it’,”

“The billionaire losers’ club was trying to unwind the deal,” Mr Sarin said. “What was fascinating was that there was absolutely no transparency in the process.”

I think these are audacious statements by Mr Sarin, considering that Vodafone Essar has to operate in the same environment that he is commenting on. Not surprisingly, a media note clarifying the remarks is released soon after.

“As I have stated in public on a number of occasions, we have great respect for the role of the Indian authorities in scrutinising transactions such as ours, in accordance with Indian law. We have also publicly expressed our appreciation for the speed and thoroughness with which scrutiny of the transaction took place by various authorities in India.”

TRAI has decided to levy a fine of Rs 500 for every unsolicited call or SMS sent by a telemarketer. Further, the telemarketer could face disconnection of services.

The regulator has exempted messages relating to financial transactions under specific contracts (between the caller and a party), charities, national campaigns, natural calamities transmitted under government directions, among others.

TRAI, through this regulation, has also called for setting up a national database that contains a telephone numbers of subscribers who do not want to receive the telemarketing calls. TRAI has mandated National Informatics Centre (NIC) to set up a National Do Not Call (NDNC) registry in three months’ time.

Telecom service providers are required to set up the call centres with toll free telephone lines to which a subscriber can call to register his name and number.

Sources: Business Standard and TRAI

High-profile Communication and IT Minister Dayananidhi Maran has resigned.

His resignation is a fallout of political turmoil after Dinakaran, a daily owned by the union minister’s elder brother Kalanidhi Maran, carried a survey that exposed chinks in the family of Tamil Nadu’s Chief Minister M Karunanidhi. Dayanidhi Maran is from Tamil Nadu’s ruling DMK party.

Lets hope this political drama does not effect the speed of India’s telecom growth.

Vodafone cleared its last hurdle in acquiring a controlling stake in Hutch Essar with finance minister P Chidambaram giving his go-ahead on Friday. His approval comes within a week of the Foreign Investment Promotion Board giving its nod for the acquisition.

The approval comes as a welcome reprieve to Analjit Singh and Asim Ghosh, whose 12.26% shareholding in Hutch Essar has been under scrutiny since the deal was announced in February. RBI and some government officials were reported to have initially opined that stakes held by Mr Singh, Mr Ghosh amounted to violation of FDI/Fema norms and were ‘benami’ transactions.

Despite the Finance ministry clearance, Vodafone will still have to contend a public interest litigation (PIL) filed by an NGO called Telecom Watchdog, pending in the Delhi High Court.

The company will be renamed Vodafone Essar.

Vodafone will now be able to constitute a new 12-member board to oversee the operations of the company. Essar vice-chairman Ravi Ruia will be the chairman of Vodafone Essar and Vodafone chairman Arun Sarin will be the vice-chairman. Max India chairman Analjit Singh and HEL MD Asim Ghosh will also be on the board.

Source: ET

The March 31 deadline for subscriber re-verification process is past.

DoT had strictly instructed operators to complete the re-verification by March 31. Failure of operators to verify would mean disconnection of the mobile numbers or the operator will face a penalty of Rs 1,000 for each unverified subscriber.

DoT took up the subscriber verification issue after it found out that most of the operators are offering mobile connections without proper documentation and verification. According to the license terms laid by the government, each operator must strictly carry out documentation and physical verification of the subscriber before offering a connection.

TV Ramachandran, director general, COAI, said that the verified status is encouraging but denied revealing the numbers.

However, sources in the industry informed that on the last day of the verification many subscriber accounts could freeze and the numbers could be more than 10 million. Most of the operators are mum on the re-verification status.

Re-verification helps in J&K:

Rattled by the discovery that militants had obtained cellphone SIM cards by faking identities of securitymen, telecom companies have temporarily barred services of over 10,000 subscribers in Kashmir and launched a massive re-verification exercise.

Reliance Communications has completed re-verification of 85 per cent of its entire wireless subscriber base. Its ARPU is expected to increase by 12 per cent as a result of the re-verification exercise, making it one of the top three players in India in terms of ARPU.

In accordance with DoT’s requirements, subscribers that could not be verified at the end of the stipulated period, despite efforts made by the company, have been deactivated. However, the company would continue its re-verification initiatives, and customers submitting the requisite complete documents would be re-activated within 48 hours, it said.

Sources: CIOL, Kashmir Live, ET

The GSM Association (GSMA), the global trade association representing more than 700 mobile operators, presented its Government Leadership Award 2007 to India for exceptional achievement in the field of mobile communications policy.

India has been selected because of its success in establishing a framework of policies and regulations, which have enabled and stimulated the growth of mobile telecommunications over the past three years. The Government has transformed the policy and regulatory environment by:

• relaxing rules on foreign direct investment (FDI)- raising the limit for foreign investment in a telecoms company from 49 per cent to 74 per cent
• reducing the access deficit charges payable by mobile operators to the fixed line incumbents
• liberalising the domestic and international long distance markets
• facilitating the sharing of network infrastructure
• simplifying and speeding the planning procedures for new cell sites
• increasing the amount of commercially available spectrum and
• securing spectrum for 3G in the IMT-2000 core band
• stimulating telecommunications equipment manufacturing

The GSMA’s Government Leadership Award was given to Brazil in 2005 and to Pakistan in 2006.

CIOL reports that the Indian Government is looking at asking post offices to validate the identification of the mobile subscriber, which can be used as an authentication system for the telecom service providers.

The post offices may charge about Rs 30 for every identification.

“The Department of Posts has been roped-in along with the Department of Telecommunications, both under the Ministry of IT and Communications, for identification and verification system for the end-users. As the postal department has a got wide-network and the postman or post-woman knows who lives where and for how long, and this itself is a good way of authenticating the veracity of a subscriber,” they said.

Mobile operators have been struggling to deal with the number of fake identification proofs being given for mobile connections. Operators had been earlier directed to discontinue all connections issued without proper verification.

Also Read: Strict verification to affect new additions

Mobile number portability is on the horizon in India. The Department of Telecommunications (DoT) has set April, 2007 as the deadline for the implementation of mobile phone number portability.

The deadline had been recommended by the Telecom Regulatory Authority of India (Trai) and submitted to the DoT in March this year.

Telecom operators have opposed the move citing various reasons.

• Implement number portability on fixed line services also
• Doing it on a national scale involves investments to the tune of Rs 18,000 crores
• A survey conducted by operator body COAI found that its not high on customer priority!

To enable operators recover their cost, Trai had suggested that subscribers porting their numbers be charged a one-time fee of Rs 200. This way the operators would be able to recover their investments in a period of three to five years. Trai had also suggested that number portability be implemented in a phased manner - first in the metros and category A circles, and then in the B and C category circles within a span of six months.

Before it changes the licence conditions to accommodate number portability, DoT will initiate a fresh round of discussions with mobile phone operators and may fine-tune some of the suggestions made by Trai.

Number portability allows mobile subscribers to switch operators without changing their numbers. It has already been implemented in Hong Kong, UK, Australia, US, Germany, France, Netherlands and Singapore.

Related: Your number forever?

Source: Indian Express

GSM body COAI says that TRAI’s recommendations on allocation of 3G spectrum were completely in favour of CDMA mobile operators and also criticised high base price of frequency.

“On the whole, the TRAI recommendations are rather slanted in favour of CDMA and disadvantageous to GSM,” COAI Director General T V Ramchandran said in a statement.

COAI believes that the route of auction and high reserve price would be very harmful for reaching the benefits of 3G in an affordable manner, and that the Government should seek to enhance its revenues for 3G through usage and not by imposing high initial fees. The association also expressed concern over TRAI considering 3G as a standalone service and not treating it as an extension of existing 2G services.

However, COAI welcomed TRAI’s views on efficient management of spectrum and endorsed the idea of formation of National Frequency Management Board (NFMB) to coordinate the availability of spectrum.

Source: ET

Following a TDSAT directive, the Telecom Regulatory Authority of India (TRAI) has come out with recommendations on activities to be taken into account for calculation of an operators’ Adjusted Gross Revenue (AGR).

What is AGR?

Telecom operators calculate their revenue and pay revenue share to the government on the basis of AGR.

Activities of an operator included in AGR:

• Sale of handsets or telecom equipment if bundled with telecom service
• Interest calculated on refundable deposit from subscribers
• Vendor’s credit
• Revenue from rent of towers and dark fibers
• Payment received on behalf of third parties
• Receipt on account of Acess Deficit Charge
• Discounts and rebates given to customers

Activities of an operator excluded from AGR:

• Revenue from discernible and standalone sale of handsets or telecom equipment not bundled with telecom service
• Income from dividend
• Capital gains unless receipts have come from telecom activities
• Gains from foreign exchange fluctuations and reversal of provisions

The industry has been given six weeks’ time to seek clarification on the issue.

Sources say the industry may seek clarification on areas like vendor’s credit and discounts given to customers, which were earlier waived from the calculation of AGR.

TRAI has come out with yet another directive aimed towards protecting the interests of the consumer.

TRAI has directed the operators to assign a unique docket number (trouble ticket number) for all service request calls made to the customer care helpline as well as special numbers for registering complaints and convey the same to the customer at the time of such call to handle consumer grievances better.

After consultations with the operators, TRAI has asked them to implement this directive before the end of 2006.

I failed to understand the reasons behind operators not assigning a trouble-ticket number at the time of registering complaints or service requests. All service oriented companies implement this simple method of handling grievances so that a particular request can be tracked and the service provider can be held accountable for non-resolution or delays.

Till today, across all operators, consumers have to depend on operator records without any proof of their complaints. So if you asked for deactivation of a service and its not done in time - you have no way to prove that.

I feel this single act of having a handle over requests will make the support departments more accountable and result in better grievance handling.

Kudos TRAI!

DoT today issued a notice to all mobile operators in Delhi, Chennai, Mumbai, Hyderabad and Haryana circles, giving them 15 days to explain why they should not be fined for violating norms.

Mobile operators had been earlier directed to discontinue all connections issued without proper verification.

“Nearly 10-15 per cent of all mobile subscribers (100 million) are unverified. However, the number of connections that may be disconnected cannot be determined at this moment.”

Business Standard quotes an Airtel spokesperson who denied receiving such a notice and added the company was on track to verify subscribers according to the deadline of October set by the DoT.

TRAI had sought comments from Telcos on imposing Interconnect Usage Charge on SMS.

All operators, except Bharti, have opposed the IUC regime. They have argued that the existng system is working well.

“We believe that the regulator should forbear in the matter of IUC charges for SMS and leave it to the service providers for mutual arrangements for mutual charges for exchange of SMS, if they so desire,” said cellular operators association of India (COAI).

Bharti Airtel has supported IUC regime saying this would discourage spam SMS. It pointed out that some operators are offering free SMS to their subscribers and this increases pressure on other networks.

Under IUC regime, an operator from whose network the SMS originates is required to pay a charge to the operator where the receiving subscriber is. Operators have said that this would raise tariff for SMS.

Source: ET

In a consultation paper on regulating SMS, telecom regulator TRAI has proposed a interconnect usage charges (IUC) on SMS. But it acknowledged that there is an apprehension that IUC could increase SMS tariffs and has therefore sought opinion of all the stakeholders by June 30.

What is an Interconnect Usage Charge?

Interconnect charges are paid by one operator to another for terminating calls from the originating operator network to the destination / terminating operator network.

So if a Hutch subscriber calls a Airtel number than Hutch has to pay certain percentage of the call charge to Airtel.

At present, interconnect charges are paid by operators to each other for voice calls.

There is no such charge for SMS.

The move is aimed at compensating operators whose networks are getting choked due to incoming SMS traffic.

“With operators offering different bundled tariff plans for SMS and with SMS being increasingly used as an advertising medium, the SMS traffic imbalance across the operators is increasing. There is a possibility that some networks are burdened with a large proportion of incoming SMS traffic. Thus, there seems to be a need for regulatory intervention to ensure that no operator assumes an unnecessary burden,” TRAI said in the consultation paper.

I believe the problem is aggravated by bulk SMS providers who use their pipe with one operator to blast messages across operators. Since there is interconnect for SMS delivery but no IUC, the operators at the receiving end are forced to carry that traffic without any gains.

Speaking at the sidelines of the GSM Association’s New Delhi conference, Telecom minister Dayanidhi Maran said that the Government was in favour of an entry fee for 3G services.

• Spectrum was a scarce resource and the Government has to make some money out of it
• We do not want operators to sit over spectrum without using it

Sunil Mittal of Bharti Airtel spoke against any such fee.

“To make 3G services affordable, there should be no separate entry fee for 3G. An entry price of any kind is also amortised over a period of time of the licence. That’s a levy the customer does not need. India must seamlessly migrate to 3G as Bangladesh and Pakistan have done, without any entry ticket.”

This comes a day after TRAI issued a consultation paper to discuss the pricing and allocation of 3G spectrum. The Government will take a decision after TRAI comes out with its recommendations.

Hopefully our government will not auction the spectrum and learn from the mistakes of Europe in 3G licensing.

The stricter mobile connection verification norms put in place from June 1 this year are likely to affect new subscriber additions, particularly in smaller towns and rural India where many people do not have proper proof of identity and rely on others to sign up for them.

The enormity of the exercise, which the operators admit is prompted by genuine concerns of national security, can be gauged from the fact that over 93% of all new mobile connections use pre-paid facility.

Mobile phone operators have been asked to strictly comply with the new procedure for verifying a prospective subscriber’s identity. They will have to start disconnecting new users at the end of the 14 day period if their verification does not come through. Millions of existing pre-paid users will also need to get their identity verified and this huge task has to be completed by October-end this year.

Although government has been pushing for implementation of subscriber verification since last year, the Haryana episode of large scale forged identities seems to have precipitated the situation.

Source: Business Standard

Telecom subscribers will soon get an ombudsman to settle their grievances and disputes. Telecom Minister Dayanidhi Maran has said that the government has given in principle approval to set up an ombudsman.

Recently, TRAI chairman Nirpendra Misra had suggested that telecom operators set up an ombudsman.

The TRAI Act empowers the regulator to make recommendations on laying down the standards of quality of service to be provided by the service providers and conduct the periodical surveys of telecom services, so as to protect the interest of the consumers.

However, it is not empowered to look into the grievances of individual customers. It cannot take any action against an operator that does not meet quality of service (QOS) standards.

Currently, there is no specialised body where consumers can go with their complaints. They can only approach courts and it is a long wait for justice.

This makes operators powerful as they disconnect phones and threaten to withdraw the numbers given to users.

In another development, TRAI has directed all service providers to furnish details of credit limit set for postpaid customers in the monthly statement/bill on a regular basis.

The authority took the step after it received numerous complaints of the hardships and inconvenience caused to the subscribers on account of disconnection of service or barring of calls when the usage exceeded the credit limit decided by the operators.

ET reports that the government has put on hold Chinese giant ZTE Telecom’s plan to enter wholesale trading in telecom equipment, following objections from intelligence agencies.

The home ministry is now conducting a detailed probe into the Chinese company’s activities and the Foreign Investment Promotion Board (FIPB) has been told that ZTE can’t be granted permission for wholesale trading before the investigation report is considered.

Already in the Indian market with a subsidiary, the Chinese company had sought permission to enhance its equity capital and enter after-sales service and wholesale trading of telecom equipment.

Security agencies have also picked up the issue of lack of adequate ’subscriber verification’ by telecom companies. They have also opposed ‘remote access’ to telecom networks which telecom companies consider necessary since many of the equipment suppliers are foreign companies.

These issues are likely to be discussed when the Union Cabinet takes up review of FDI guidelines for telecom companies following the recent decision to enhance foreign investment ceiling in telecom to 74%, compared to the earlier level of 49%.

TRAI has suggested formation of a trust by all telecom operators in order to create consumer awareness for refund claims.

In the past, the regulator has ordered various telecom operators to refund excess charges to subscribers. In many cases, a significant number of subscribers didn’t come forward to claim refunds.

“This trust can help in creating awareness through various programmes. There are 24 regional consumer councils. The trust can help them in organising conferences and conducting various programmes,” said Trai chairman Nirpendra Misra.

Funding for the trust will come from unclaimed refunds from the consumers. Presently, the telcos have a total undisbursed amount of about Rs 10 crore. If a subscriber comes forward to claim his refund, the trust can always give his refund.

Source: ET