Mukesh Ambani, Sunil Mittal, Vodafone Idea receive special request from Samsung, Nokia, it is…

Telecom operators including Bharti Airtel, Reliance Jio and Vodafone Idea (Vi) have requested equipment makers such as Nokia, Ericsson, Samsung to pass the recent hike in the basic customs duty (BCD) on printed circuit board assemblies (PCBAs).

This request comes in the wake of the Indian government increasing the BCD from 10% to 15% and these firms will incur more financial pressure as they seek to roll out 4G and 5G networks.
 
The operators argue that the extra 5% cost is unaffordable, which they have not been able to fully recover the cost of their 5G services. They also opine that the recent tariff increase which has been in the range of 11% to 25% will not generate much revenue until the December quarter of FY25.

As the 5G networks are not yet fully developed globally. The telecom companies argue that by passing the higher import duties to them, the benefits of such tariff hikes would be offset and the companies would struggle to properly monetize the 5G services.
 
A senior executive of a leading 5G equipment manufacturer said, "There is pressure on network vendors to bear the increased BCD on imported PCBAs as the telcos say that they have only started tariff repair." He pointed out that if these costs are passed on to telecom operators, it will significantly reduce the gains from recent tariff changes and will further complicate the process of monetizing 5G.
 
Vodafone Idea has a major problem here as it is deeply in debt and at the same time, it requires upgrading its 4G network before it can roll out its 5G services. The company has been in talks for financing, including a term loan which was proposed at $6. 6 billion to enhance its network facilities, all these show that the company is real and serious about its business. This financial pressure is further exacerbated by the need to extend its 4G network, which is important for future 5G rollouts.

Meanwhile, Reliance Jio and Bharti Airtel are in advanced negotiations to procure approximately 2 billion dollars worth of network equipment as they prepare for the second phase of their 5G rollout. The urgency for these operators to secure favourable terms from equipment suppliers is heightened by the need to remain competitive in a rapidly evolving market.

The increase in BCD on PCBAs marks a significant hurdle for the telecom sector, which is already navigating the complexities of network expansion and debt management. As these companies strive to enhance their service offerings, collaboration with equipment manufacturers will be crucial in mitigating the financial impacts of these regulatory changes.