FE Editorial : Rethinking telecom

Written by The Financial Express | Updated: Nov 10 2012, 08:30am hrs
Assuming telcos dont contest it, the Cabinets decision to impose a Rs 31,000 crore levy on extra spectrum will give some respite to a cash-strapped government. Though around R12,000 crore of this are dues from BSNL and MTNL, which cannot get paid unless the government gives them a cash infusion, and telcos have the option of paying the money in instalments, the money the government stands to get is still a tidy sum. More so since telecom biggies have made it clear they are going to be only peripheral players in next weeks auctions.

What the government now needs to do is to examine whether it is feasible to have both high auction values (R14,000 crore is the base price for a 5 MHz spectrum slot in the 1800 MHz range) as well as high licence fee/spectrum charges. To take the example of telcos who have got extra spectrum without paying any upfront licence fee, the government has already got around R9,500 crore from them since, when the telcos were given the extra spectrum, the government hiked the annual spectrum charge, and kept hiking it as the amounts of spectrum got larger. This Rs 9,500 crore, it is estimated, will double by the time the licences expire for these telcos. If telcos are asked to pay both the high upfront fee as well as a 10-12% annual licence fee/spectrum charge, theyll end up paying around a fourth of their revenues just for this. Add to this the costs of sales, staff costs and other operational costs, and there wont even be enough money to service debt taken on to build networks. Thats something worth thinking about.