The department of telecommunications has sought about Rs 5,600 crore from Reliance Communications (RCom) for liberalising the 5 Mhz spectrum it holds in the 800 Mhz spectrum band in 16 circles. Additionally, a demand of Rs 1,596 crore towards a one-time spectrum charge has also been raised.
The amount would have been much higher than Rs 5,600 crore had the DoT not treated the auction prices of March 2015 even in those circles where spectrum less than 5 Mhz was auctioned as market price for liberalising the administratively held spectrum.
For instance, of the 16 circles where RCom wants to liberalise its 800 Mhz spectrum by paying the market determined prices, only 8 circles fall in the category where more than 5 Mhz of contiguous spectrum was auctioned.
The final per Mhz price of this spectrum in the 8 circles was around 2.06 times of the reserve price.
However, in the other 8 circles where spectrum for auction was less than 5 Mhz the final price was almost close to the reserve price. This is because for offering 4G services on 800 Mhz a minimum of 5 Mhz of contiguous spectrum is required.
However, RCom holds 5 Mhz in these circles so it gains by paying a lesser charge as per the Cellular Operators Association of India’s letter to the DoT. The COAI had urged the government not to take the auction prices of the circles in which less than 5 Mhz spectrum was put to auction as the price for liberalising spectrum as it is not a true indicator of its value. However, the DoT rejected its appeal.
According to sources, the DoT had issued a notice on December 22 and asked RCom to pay within a month.
RCom had applied for liberalising its 800 MHz spectrum in 20 circles a few months back. The company, though is yet to receive any notice for the remaining four circles, where market determined price is not available. The four circles are —Kerala, Karnataka, Rajasthan and Tamil Nadu.
When contacted a Reliance Communications’ spokesperson declined to comment.
To liberalise administratively alloted spectrum, telcos need to pay market determined price for the remaining period of the licence.
Reliance Group chairman Anil Ambani had announced RCom was tying up trading and sharing of spectrum with Mukesh Ambani-led Reliance Jio including for the much-awaited 4G services.
Addressing the annual general meeting, Ambani had said both the companies were at “an advance stage of discussion” for finalising a nationwide spectrum trading and sharing arrangement.
In order to share or trade spectrum, operators need to liberalise their spectrum.
The spectrum will be liberalised for the remaining period of the licence terms held by the operator. The operator will have to pay auction determined price prorated for the balance validity period, as per the guidelines.
The government will levy latest auction determined price on the spectrum to be liberalised. In case auction price is more than one year old then the prevailing market rate would be determined by indexing the last auction price at the rate of SBI prime lending rate.