Draft Cabinet note sent to finance, law ministries, Plan panel and DIPP

In order to provide a level-playing field to all telecom operators ? incumbents as well as new players ? once liberal use of spectrum is permitted, the department of telecommunications (DoT) has proposed to charge all incumbent operators the auction price for every Mhz of spectrum they hold. The proposal recommends charging for spectrum held till 6.2 Mhz (5 Mhz for CDMA) only for the remaining period of licences.

On the issue of charge to be levied on spectrum held beyond 6.2 Mhz (5 Mhz for CDMA) the government is awaiting response to its Presidential reference currently before the Supreme Court whether the one-time charge has to be levied for the entire period it is held by an operator ? a maximum of 20 years, which is the tenure of a telecom licence ? or only for the remaining period out of the 20 years for which the operator will now hold the spectrum.

This auction price will be determined in the forthcoming 2G spectrum auctions which the Supreme Court has mandated the government to conduct before August 31.

A draft Cabinet note seeking approval on the same has been circulated to the finance ministry, ministry of law and justice, Planning Commission and the department of industrial policy and promotion.

Meanwhile, the note has suggested that until the auctions are held, the government can charge the operators on the basis of reserve price which is to be fixed by the empowered group of ministers (eGoM) and can be adjusted at a later date.

The move seeks to increase the payout burden on incumbent operators such as Bharti Airtel, Vodafone, Idea Cellular, Reliance Communications and Tata Teleservices for whom the Telecom Regulatory Authority of India had fixed spectrum held in excess of 6.2 Mhz as the threshold for charging the one-time spectrum fee and the Telecom Commission had proposed an even more stringent threshold of paying for spectrum held in excess of 4.4 Mhz. RComm and TTSL do not hold spectrum beyond 6.2 Mhz.

?Since new players will come who would pay for entire spectrum from zero onwards, there will be no level-playing field between them and those who received spectrum at an administrative price. Secondly, spectrum which was given through an administrative price or through auction in 2001 is not liberalised and doesn’t have flexibility to use any technology in that band. Current spectrum to be auctioned has that flexibility. In the current auction both new and old players can bid. Consequent analysis shows that if level playing field is to be maintained between incumbents and the new entrants, after change in policy of spectrum assignment through auction, then it would be advisable to make this price applicable to incumbents right from zero onwards and not above 4.4 Mhz as recommended by the telecom commission, prior to the Supreme court Order and also not for more than the 6.2 Mhz as recommended by the Trai prior to the DoT announcement in January 2012. At the same time incumbents can be allowed the same facility of liberalised usage of spectrum once this tariff is paid,? the note says.

On the issue of mergers and acquisitions, the government has decided to dismiss the regulator’s recommendation of levying a a 5% transfer charge on the difference between transaction price and the market price of spectrum as also recommended by the telecom commission.

The note also says that sharing of spectrum will be permitted only when both licensees have paid for the spectrum based on reserve price/ auction price determined subsequent to Trai recommendations of auction dated April 23 and May 12.