Proposed hike in spectrum charges could pinch telcos

Written by Rishi Raj | New Delhi, Aug 30 | Updated: Aug 31 2007, 05:17am hrs
The recommendation of the Telecom Regulatory Authority of India (Trai) to increase the annual spectrum charges paid by operators on a revenue sharing basis by 1% beyond 8 Mhz would result in Bharti Airtel having to fork out around Rs 55 crore more and Vodafone Essar, about Rs 40 crore. These are the only two companies, which have 10 Mhz each of spectrum in Delhi and Mumbai circles.

However, if Reliance Communications Ltd, which is predominantly a CDMA operator, wants to provide GSM services under one licence, it would get a moratorium of a year on paying combined charges for the spectrum. This is because the regulator has said that it would be unfair to ask for increased charges before the company enrolls subscribers.

Currently, Bharti and Vodafone pay 4% of their adjusted gross revenue (AGR) towards spectrum charges as this is the highest slab for holding 10 Mhz spectrum. However, Trai has proposed that 10 Mhz onwards, the charges be raised by 1% to 5%, for 12.5 Mhz by 6%, upto 15 Mhz by 7% and beyond it, by 8%.

According to rough estimates, during 2006-07, Bharti paid around Rs 188 crore towards spectrum charges while Vodafone paid about Rs 120 crore. If the Trai recommendations are accepted by the department of telecommunications (DoT), Bharti would pay Rs 12-13 crore more every quarter while Vodafone would shell out Rs 10 crore more every quarter.

Trai has proposed that for the purpose of payment of the spectrum charge, the spectrum held by the two licencees will be added/merged and the annual spectrum charge will be at the prescribed rate applicable on this total spectrum. It has made an exception in cases where a new service is started under one licence.

For instance, if a player like Rcomm gets into GSM service by acquiring another GSM operator, it would have to pay spectrum charges on the combined spectrum. However, if the company starts GSM service under a new licence then it would be exempted from payment of combined spectrum charges for a year. This is because, if the moratorium is not given in such cases, it would destabilise the financial working of the operator.