Home broadband bills could come down if government cuts its share⁠ — big boost for Reliance Jio and Airtel

Airtel Chairperson Sunil Mittal and Reliance Industries Chairman Mukesh Ambani.BCCL / Business Insider India
  • Home broadband bills are likely to come down as the government is reportedly considering slashing license fees it charges from internet service providers.
  • The move will result in the loss of ₹5,000 crore in license fees to the government, but lower bills could increase broadband penetration, thereby boosting the GDP.
  • Mukesh Ambani’s Reliance Jio, and Airtel, two leading internet service providers in the private sector are likely to benefit the most.
Home broadband bills are likely to come down as the Indian government looks to boost its adoption. Mukesh Ambani’s Reliance Jio, and Airtel are likely to be the biggest gainers if the government goes ahead with this.

According to a Bloomberg report, the Indian government is considering slashing license fee on the adjusted gross revenue (AGR) on fixed-line home broadband services to ₹1 a year.

By reducing license fees to ₹1, the Indian government is estimated to forego over ₹5,000 crore revenue over the next five years, according to the report.

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At the moment, the government charges 8% of AGR, which brings in ₹880 crore a year to the government.


Reliance Jio, Airtel likely to be the biggest gainers

Private players Airtel and Reliance Jio together account for 26% of wired broadband users. While Airtel has been in this sector for a long time, Reliance debuted last year with the commercial rollout of JioFiber. In a span of less than one year, it has amassed over 1 million users.

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Over the last 10 weeks, Mukesh Ambani entered into 11 deals raising over ₹1.04 lakh crore ($15.2 billion). This had led to a rally in the Reliance Industries (RIL) stock, which has doubled its stock price since the nationwide lockdown was announced on March 23.

Reliance Industries share price since March.BSE / Business Insider India / Flourish

Airtel, on the other hand, has delivered a more modest growth of 42% in the same period.

Airtel share price since March.BSE / Business Insider India / Flourish

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The Indian broadband industry is dominated by state-run telecom operators like BSNL and MTNL, which together account for 59% of India’s wired broadband users. According to the latest numbers released by the Telecom Regulatory Authority of India, India has a little over 20.6 million wired broadband users in the country.

CompanyWired broadband usersMarket share
BSNL915118344%
Airtel431495521%
MTNL310842215%
Tata Teleservices17879759%
Jio10553895%
Reliance Communications5364283%
Vodafone Idea4380642%
Quadrant1923391%
Source: TRAI, as of January 2020

Why does the government want to reduce license fees on home broadband?

The move to reduce license fees on wired home broadband services is aimed at boosting its penetration and thereby improving the gross domestic product (GDP) of the country.
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GDP is the sum of all final goods and services produced in a country in a year.

According to a World Bank report, an increase of 10% in broadband penetration is likely to boost the GDP by up to 1.38% in developing countries like India.

SEE ALSO:

Airtel shares set for a catch up rally after Reliance Jio takes a huge valuation lead

JioFiber announces double data benefit offer on annual subscriptions

Amazon reportedly wants Airtel stake for $2 billion ⁠— and a partnership like Jio-Facebook and possibly, Google-Vodafone Idea

Airtel shares jump by 10% despite an unexpected quarterly loss
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