India to abolish levy on phone firms; shares rise

NEW DELHI (Reuters) - India's telecoms regulator said on Thursday it would phase out levies paid by telecoms firms to a state-owned operator, raising hopes that tariffs could fall further and triggering a rally in sector stocks.

India has recently awarded more than 100 new telecom licences to a number of new and existing firms.

Telecom firms pay 0.75 percent of their revenue to Bharat Sanchar Nigam Ltd and international long distance service providers pay 1 rupee (2.5 U.S. cents) per minute on incoming calls.

The levies, known as the access deficit charge (ADC), were introduced in 2003 to help the former monopoly operate in a competitive environment.

The Telecom Regulatory Authority of India said it would abolish the ADC as a percentage of revenue share from April 1 and halve the charge on international calls before abolishing it in October.

"ADC puts unfair burden on new entrants and distorts market conditions," the regulator said in a statement. "It is also a source of arbitrage and thereby results in grey market operations in international calls."

Bharti Airtel, India top mobile firm, said it would pass on the benefits of ADC sunset to its customers, primarily in the rural areas.

The firm said in a statement it would make an announcement on the details within a week after consulting the regulator, but a spokesman later said it had not set a time frame for the decision.

Shares in Bharti rose 2.7 percent to 824.65 rupees, while No. 2 Reliance Communications gained 2.3 percent to 538.05 rupees and Idea Cellular firmed 2.1 percent to 103.25 rupees in a Mumbai market that closed 0.4 percent down.