Flat spectrum charge: DoT works out revenue impact

Incumbent mobile operators could save up to Rs 2,600 crore over a 10-year period if the Government reduces the spectrum usage charges to five per cent.

According to calculations by the Department of Telecom, if three per cent flat spectrum usage rate is applied for the six licences expiring in 2014-15, the Government’s revenue would fall by Rs 196 crore and Rs 220 crore for the next two fiscal years, respectively.

Auction on jan. 23 The DoT will present these calculations to the Finance Ministry to finalise the usage fee for spectrum. Last week, the Cabinet had ordered the DoT to finalise the revised charges before the auction is held. The auction will start on January 23 and a decision on spectrum charge is crucial for the bidders.

Under existing rules, operators are required to pay a fee for using spectrum, which ranges 1-8 per cent of annual revenues depending on the quantum of spectrum the operator holds. TRAI proposed to change this to a flat fee of three per cent, irrespective of the quantum of spectrum.

Broadband players, such as Reliance Jio, have also objected to the proposal, since they currently pay only one per cent as spectrum charge.

Incumbent players, including Vodafone and Airtel, however, want the fee to be flat as they pay as much as eight per cent now.

Mobile operators collectively paid about Rs 4,500 crore as spectrum charges in 2012-13. The DoT has not calculated the impact of imposing a flat fee on broadband players because it does not have any data on the potential revenue that these players could generate.

Most of the operators that won spectrum in 2010 have not started rolling out services and are currently not paying any amount to the Government.

Potential bidders said the Government should take a decision quickly to enable them to firm up their strategy.

“If there is a revenue impact, the DoT can fix a slightly higher fee that would make it a revenue neutral decision. But a flat usage charge would boost the bidders’ confidence and the Government could end up making more money if the bids get aggressive,” said an industry representative requesting anonymity.

Key for M&A This is also important for mergers & acquisitions and spectrum trading because a fee independent of the quantum of spectrum will encourage players to hold higher amounts of airwaves, which in turn would result in better quality of service for users.

>thomas.thomas@thehindu.co.in