1. Telcos in trouble, panel wants relief on spectrum trading, approaches DoT

Telcos in trouble, panel wants relief on spectrum trading, approaches DoT

To make spectrum trading more attractive to telecom players, the Telecom Commission (TC) has asked the Department of Telecommunications (DoT) to examine the legal feasibility of charging licence fee and spectrum usage charge from sellers of spectrum only on the profit they earn in such trade rather than on the entire proceeds.

By: | New Delhi | Updated: September 15, 2017 6:18 AM
spectrum row, spectrum trade, trouble for telecom companies over spectrums The TC which met last week directed the DoT to seek a legal opinion on whether such an amendment can be made in spectrum trading guidelines and if yes, whether it should be made applicable retrospectively or prospectively.

To make spectrum trading more attractive to telecom players, the Telecom Commission (TC) has asked the Department of Telecommunications (DoT) to examine the legal feasibility of charging licence fee and spectrum usage charge from sellers of spectrum only on the profit they earn in such trade rather than on the entire proceeds. The TC which met last week directed the DoT to seek a legal opinion on whether such an amendment can be made in spectrum trading guidelines and if yes, whether it should be made applicable retrospectively or prospectively. The TC’s direction came on the recommendation of the inter-ministerial group which has been tasked with suggesting measures to bring relief to the stressed telecom players.

Though spectrum trading guidelines were approved by the Cabinet more than two years ago and there have been a number of deals, the biggest dampener in trading pacts or a factor which makes it costly is the double charge companies have to pay for such agreements. The seller of the spectrum has to pay to the government licence fee and spectrum usage charge amounting to 13% of its adjusted gross revenue on the amount it receives from the buyer even if the spectrum is acquired through auctions.

The buyer needs to pay a transactional charge to the government which is 1% of the transactional amount or 1% of the prescribed market rate whichever is higher. The industry had earlier urged the government not to charge licence fee and SUC from the proceeds of the seller as it amounts to double charging, but the government had rejected it.

For instance, when in 2016 Bharti Airtel acquired 1800 Mhz band spectrum of Videocon Telecommunications, it was around 61% higher than the auction determined prices of 2015. If the amendment under consideration is effected, the seller would only have to pay a one-time licence fee and SUC on the profit earned from the trade — that is the difference between the auction price and the traded price — rather than the entire proceeds.

Sources said on the issue of deferred spectrum payment liability, the TC has directed the DoT to also explore options of telcos paying installments in 12-year and 14-year period, besides the 16-year period suggested by the IMG. Currently, operators pay the dues over a 10-year period.

On the issue of replacing PLR with MCLR for calculation of interest on delayed payment of SUC and LF, the commission wants the DoT to ensure that the interest charged “continues to act as a disincentive to the operators”. The TC has also directed the department to quantify the total relief required by the industry, they added. The DoT has to get back to the commission with its replies by the last week of September when the TC is scheduled to meet again.

The telecom industry’s total debt stands around Rs 4.60 lakh crore. It has bought spectrum worth Rs 3.45 lakh crore since 2010 for which an upfront payment of Rs 1.90 lakh crore has been made and a balance Rs 3.08 lakh crore needs to be paid up to 2028-29.

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