Govt looking at relaxing spectrum trading rules

Written by Subhomoy Bhattacharjee | New Delhi | Updated: Aug 3 2014, 11:54am hrs
SpectrumFreedom to trade in spectrum will create an additional cash flow for them. (Reuters)
To keep mobile call charges from spiraling up the government could soon relax spectrum trading rules to give some of the ailing telecom companies the chance to exit at attractive prices.

Government officials said this is expected to coincide with a fresh look by the government at the two-slab spectrum usage charges (SUC) that had been approved by the UPA at the fag end of its term.

Spectrum or airwaves is the most significant asset of a telecom service provider and so the freedom to trade in them will create an additional cash flow for them.

But both on their trading, and the charges that should be paid on them, the telecom service provider companies have differed bitterly among themselves and also lobbied with the government.

In response, this week the telecom regulator has issued a consultation paper on all levies imposed on the sector and sought replies on them by September 1.

The Telecom Regulatory Authority of India under Rahul Khullar has asked for comments on whether spectrum usage charges, licence fees (LF) including Universal Service Obligation Fund should be retained or tweaked.

Khullar told The Indian Express this was essential to do so. You cannot hope to ignore valid points raised by the industry, especially if you want to attract foreign direct investment in the sector.

The paper says the re-look has been mandated by the New Telecom Policy of 2012. It quotes the policy saying, A second feature of (the policy) is the stated need to rationalise taxes, duties, and levies affecting the telecom sector and work towards providing a stable fiscal and regulatory regime to stimulate investments and making services more affordable.

Despite the UPA Cabinet having agreed on a 5 per cent spectrum usage charge in January this year, the regulator has noted it may be time to take a second look at licence fees and spectrum usage charges to see if a change is warranted.

It wants to do this by clarifying on another contentious issue for telecom companies; that of adjusted gross revenue or AGR.

Commenting on the development, Jaideep Ghosh, partner at KPMG India said, In the changing Indian telecom landscape with multiple services within an unified licence, AGR needs to be unambiguously defined; non-core revenues need to be carefully evaluated. This has been a long pending issue that the industry and regulator needs to resolve.

Trai has pointed out that the multiple levies on the sector are a dampener for fresh investment for the sector which needs to expand to fulfil its role as the technology backbone for the country.

A moderate licence fee and spectrum usage charge will also keep mobile charges low for consumers, said Khullar.

The Trai paper shows that the government had an unspent balance in the universal service obligation fund as on March 31, of Rs 33,682.85 crore. Of the total funds collected over 12 years, more than 57 per cent is undistributed, it notes. Telecom companies pay annually a total licende fee of 8 per cent as revenue shared with the government, including 5 per cent towards this fund.

The paper argues that the intention of the government cannot just be to soak more money from the sector that in turn is used only to finance the fiscal deficit.

Instead it should focus on moving to an auction regime as a single point revenue realisation avenue and cut the administrative levies.

The government is planning to hold the next round of auctions this year for a set of spectrum from which it hopes to generate at least Rs 45,000 crore. The department of telecommunications expects the companies will bid aggressively as they did last year too when the auctions mopped up Rs 61,000 crore.

The companies need more spectrum to roll out 3G and 4G services but their capacity to bid is restricted because of the high fees on various counts which the Trai has asked for clipping.