The Cabinet today approved levy of a one-time fee on GSM operators with more than 4.4 Mhz spectrum.
But a decision to impose the fee on CDMA players has been put off. That’s because the levy was supposed to be calculated on the final bid price in the upcoming auction. Since there are no bidders for CDMA spectrum, the Government does not have a base to calculate the one-time fee.
Communications and IT Minister Kapil Sibal said that while CDMA players with over 2.5 Mhz spectrum will have to pay the one-time fee, the pricing mechanism will be determined separately by the Department of Telecom. The proposal will be brought back to the Cabinet after the DoT takes a view. The Government expected to get about Rs 6,000 crore from CDMA operators.
For GSM players, the one-time fee will be in line with what the Empowered Group of Ministers had decided. For all spectrum holdings beyond 4.4 MHz, a one-time prospective charge will be levied at 2012 auction determined price.
“The decision is expected to impact the industry with an additional financial burden of Rs 30,000 crore, which eventually, will be passed on to the consumers in the form of increased prices,” said Rajan Mathews, Director-General, Cellular Operators Association of India. Mathews said the decision has been made without giving due consideration to the effect it would have on the subscriber, and without considering the diminishing finances of the industry,
The Government expects to garner Rs 26,864 crore from the fee but the actual inflow could be less. For one, the level of interest in the GSM auction is weak. There are only five players in the fray and none of the bidders has applied for pan-India spectrum. Bharti Airtel’s Chairman Sunil Mittal said the auction could get over in a day. There may be also circles where the Government does not receive any bid. In such a scenario, the one-time fee on GSM players will also have to be reviewed by the DoT.
Even if the one-time fee is derived, the operators will be allowed to pay in instalments for the balance number of years of licence at an interest rate of 9.75 per cent.
Mechanism for M&As
The Cabinet also approved the spectrum pricing mechanism for merger and acquisitions. Companies buying an existing operator will have to pay the Government a market price determined at the upcoming auction. The move is aimed at preventing players from making any windfall gains by opting to acquire an existing company rather than participate in the auction. This means if a company such as Sistema JSFC were to buy Aircel, the Russian major would have to pay the Government at least Rs 14,000 crore.
Sharing of spectrum, without any additional one-time spectrum charge, will be permitted between operators that have paid for spectrum beyond 4.4 MHz. But both players would have to pay spectrum usage charge at the slab rate applicable on the entire combined spectrum holding. For example, if Reliance Communication, which has 4.4 Mhz spectrum, shares it with Tata Teleservices, which also has 4.4 Mhz, then both companies will have to pay spectrum charges for 8.8 Mhz.
Analysts said that the additional fee will distress the sector further, particularly with profits and margins already under pressure.