Vodafone offers Rs 4k cr to retain spectrum licences

Written by Jayati Ghose | New Delhi | Updated: Nov 20 2013, 14:03pm hrs
Vodafone India has offered to pay a reasonable price to retain spectrum in the efficient 900 MHz band in its Delhi, Mumbai and Kolkata circles. It has also urged the empowered group of ministers (EGoM), which will meet on Friday to discuss auction issues, to cap spectrum usage charges (SUCs) at a flat 3%.

In a letter to finance minister P Chidambaram, who also heads the EGoM on telecom, the Indian am of UK-based telecom giant has offered to pay R4,000 crore to the department of telecommunications (DoT) at 3% SUC to extend its existing licences in the Delhi, Mumbai and Kolkata circles for 20 years.

Earlier, Marten Pieters, managing director and CEO of Vodafone India, had told FE that the company is willing to pay 1.6 times the auction determined price in 1,800 MHz spectrum for the highly-efficient 900 MHz spectrum.

Trai's rationale to set price for three circles, in which 900 MHz spectrum would be auctioned, at 1.6-1.7 times the 1,800 MHz price seems logical and we are willing to pay a reasonable market price for this efficient spectrum, Pieters had said. Vodafone is not in favour of any auction for the 900 MHz spectrum band.

Even on usage charges, Vodafone has agreed with telecom regulator Trai's argument that "the existing SUC regime has spawned several anomalies and contains numerous inherent deficiencies". Trai has proposed a uniform 3% rate for all auctioned spectrum and a maximum charge of 5% of the adjusted gross revenue of operators for non-auctioned spectrum.

Currently spectrum usage charges range between 3%-8%. Charges go up as spectrum holding increases. Trai had said that differential SUC acts as a disincentive for any merger or acquisition, spectrum sharing and trading as well as in acquiring any additional spectrum. It also creates unwanted opportunities for arbitrage between bands and technologies likely to operate under a common unified licence.

Trai had also said that "if DoT is of the view that the uniform rate of SUC should be 1%, the authority would not have any objection".

In its letter to Chidambaram, Vodafone has pointed out that if SUC were maintained at the existing differential and discriminatory levels instead of a uniform SUC as recommended by Trai, it would stifle participation in auctions.

In the letter, Vodafone also states that it supports and endorses Trai recommendation that the government take an in-principle decision to allow spectrum trading and announce this prior to commencement of the forthcoming auctions, preferably as part of the auction Notice Inviting Applications.