The Empowered Group of Ministers on Monday decided that all GSM operators with more than 4.4 Mhz spectrum will have to pay a one-time fee for the remaining period of their 20-year licence. Operators using CDMA technology will have to pay for all spectrum over 2.5 Mhz.
If imposed, this one-time fee could mop up about Rs 27,000 crore. The biggest impact will be on state-run Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd since they have as much as 10 Mhz spectrum in most circles.
Pricing basis
Among private players, Bharti Airtel could end up paying the most. Airtel, for instance, has 10 Mhz in the Delhi circle. The operator will have to pay for 5.6 Mhz for the remaining two years of its licence, which it got in 1994.
But Airtel, along with Vodafone and Idea Cellular, could have ended up paying much more had the EGoM picked the other options on the table, including the one on paying charges retrospectively.
The pricing will be based on the final bid price in the upcoming spectrum auction in November. The base price for this auction is set at Rs 14,000 crore for 5 Mhz of spectrum pan-India.
There will be a significant impact on Reliance Communication also, because it not only has excess GSM spectrum in a few circles but also CDMA spectrum in most operating areas. RCoM has 5 Mhz of CDMA spectrum in Delhi and Mumbai.
It will have to pay for 2.5 Mhz for the rest of the 10 years of the licence, obtained in 2002. In addition to the pay out, RCoM also losses out on the opportunity to claim additional GSM spectrum up to 6.2 Mhz. Though the financial impact on Tata Teleservices is less than that on RCom and Airtel, it will also not be able to claim any more additional spectrum.
Market mechanism
“By fixing the cut-off limit at 4.4 Mhz, the EGoM has clearly sent out the signal that spectrum will not be given free or without following market mechanism,” said a market analyst. The decision to impose the one-time fee has been hanging fire for over two years, with the Department of Telecom looking at multiple options including charging for all spectrum the operators hold and imposing the fee retrospectively. According to sources, the EGoM decided to set the cut-off limit at 4.4 Mhz in order to achieve a level playing field as operators entered the market at different times.
The EGoM’s decision will be sent to the Cabinet for final ratification on October 16.