Column : Trai again

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: The proportion of revenues that telecom companies in India pay as licence fees and spectrum charges depends on type of service (eg mobile, Internet, long distance), circle (e.g. Delhi, Bihar) and technology (e.g. GSM, CDMA, 2G, 3G, WiMax). Newspaper reports suggest operators arbitrage i.e. exploit the differential in fees to escape large payments to the government. Wireless players are currently arguing over whether revenues of companies that deploy more than one technology (e.g. GSM, CDMA, 2G, 3G, or BWA) should be treated separately or combined for computing fees owed to the government. In order to protect its revenues and ensure fair competition amongst players and technologies, the government will need a mischief-proof fee regime that reflects the new environment where old service definitions are increasingly irrelevant.

Trai data for revenues and fees paid by the top six mobile players in the last quarter raises question about Reliance. Why does Reliance have a larger market share but lower revenues than BSNL and Vodafone? Is it that Reliance allocates its non-voice revenues to its ISP licence, where fees are lower?

While revenue shares do appear ‘reasonable’, there seems to be little rigour in how Trai or government decide the exact proportion. For instance, the revenue share for mobile operators was 15% in 1999 and is now 10%, 8% and 6% depending on type of circle. Long distance players were paying 15% till 2005, now 6%. Internet service providers (ISPs) pay nothing or 6% for some services. While it makes sense to charge more for metros and least for C circles, it seems odd that new players in the service area pay the same even after the market is nearly saturated (e.g. Delhi, Mumbai). So, giant Airtel pays 6% of revenues for over 55 lakh subscribers in Bihar, but Aircel pays 10% for two lakh subscribers in Kolkata.

Spectrum fees for 4.4 MHz of GSM and 2.5 MHz of CDMA spectrum is included in the licence fee. In 2002, companies were asked to pay an additional 2% of their revenues for spectrum up to 6.2 MHz. There is daily speculation whether fee for spectrum beyond 6.2 should be a one-time lump sum or a suitable revenue share.