Telcos spent an additional Rs 10,000 crore in FY23 to support OTT

Telecom operators have spent an additional Rs 10,000 crore in capex since March 2022 to enhance network infrastructure needed to support traffic from four-five Over The Top (OTT) service providers, the Cellular Operators Association of India (COAI) told the Finance Ministry.

The industry body wants this additional capital expenditure to be borne by these Large Traffic Generator (LTGs) OTTs as a proposed fair-share charge (FSC). Representing the three private sector telcos, COAI said the FSC is necessary for the development and upkeep of telecom networks across the country, as colossal traffic is being loaded on the networks by OTTs as data demand grows.

In a letter to Finance Secretary T V Somathan on January 9, COAI said while the enhanced data traffic due to LTGs does contribute to operator revenues, it remains ‘grossly inadequate’ to cover the increase in infrastructure capex. Reviewed by Business Standard, the letter points out that telecom industry capex rose 15 per cent to Rs 53,661 crore in March 2022, up from Rs 46,532 crore in March 2021 to accommodate the then traffic from TSPs.

“However, from 2022 onwards the infrastructure spends saw a steeper growth in the capex figures, going up to Rs 73,922 crore in March 2023,” COAI said.

Business Standard had reported in January that COAI has communicated to the government that it is willing to accomodate rising data traffic generated by all startups, MSMEs, and smaller OTTs, but want the large traffic generators to pay up the proposed FSC).

COAI repeated its argument that with OTTs not compensating telcos, the government is also losing out on tax revenues.

A FSC paid by OTTs to telcos would increase the latter’s earnings, and would have enabled them to pay additional tax worth Rs. 800 crore in 2023 under the existing 8 percent overall tax rate for operators, COAI said.

Not enough subscriber growth
Going by a notional Average revenue per user (ARPU) of Rs 200, the increase in capex for infrastructure can be offset by a subscriber base of 50 crore additional subscribers, COAI said.

“Going by the current consolidated subscriber base of 114.4 crores, this additional subscriber base of 50 crores is unachievable,” COAI said. Consequently, the infrastructure spends will continue to surpass the earnings of the TSPs over the years, since ARPUs take into account revenue collections due to voice, data and SMS for the entire subscriber base. Business Standard