Telecom panel recommends minimum 3% spectrum usage charge for all operators

By: | Updated: July 25, 2016 9:28 PM

Inter-ministerial panel Telecom Commission today recommended 3 per cent annual usage charge for the spectrum to be sold in upcoming auction while fixing the same as the minimum rate even for existing airwaves with all operators.

With the Telecom Commission suggesting the floor SUC rate, Reliance Jio would have to pay fee at the rate of 3.05 per cent, Aircel at 3 per cent while no change for Airtel. (Reuters)With the Telecom Commission suggesting the floor SUC rate, Reliance Jio would have to pay fee at the rate of 3.05 per cent, Aircel at 3 per cent while no change for Airtel. (Reuters)

Inter-ministerial panel Telecom Commission today recommended 3 per cent annual usage charge for the spectrum to be sold in upcoming auction while fixing the same as the minimum rate even for existing airwaves with all operators.

The suggestion, which will now go to the Union Cabinet for approval, may hit telecom players who are paying less than 3 per cent spectrum usage charge (SUC).

Sources said that bidding for Rs 5.66 lakh crore mega-spectrum auction will start in 45-50 days from the date the Cabinet approves the proposal.

“We have to maintain level-playing field and then move towards uniform SUC rate for all airwaves which Trai has been suggesting. The recommendation made by Telecom Commission earlier will stay. A new point has been added that all telecom operators will have to pay a minimum 3 per cent SUC,” an official source said.

Earlier, the Telecom Commission had recommended a spectrum usage charge of 3 per cent for airwaves to be sold in future auctions. It had also suggested that players will continue to pay weighted average of fee for existing airwaves.

The Union Cabinet, last month, approved spectrum auction rules, except SUC, recommended by the Telecom Commission and asked the panel to take a Trai’s opinion on the matter.

The uniform SUC rate has been a highly contentious issue of late with the industry due to difference in the fee for 2300 Mhz band (1 per cent) and other bands.

Reliance Jio, which bagged airwaves in 2300 Mhz band in 2010 auction, has opposed levying of uniform SUC rate, as suggested by Trai, as it pays only 1 per cent fee on the BWA spectrum as per the norms fixed for sale at that time.

However, it acquired some spectrum later on which higher SUC was being charged and the company is required to pay as per the weighted average formula.

With the Telecom Commission suggesting the floor SUC rate, Reliance Jio would have to pay fee at the rate of 3.05 per cent, Aircel at 3 per cent while no change for Airtel.

Earlier, it had suggested that weighted average will be calculated between broadband wireless access (BWA) spectrum, the current SUC rate and the spectrum that will be acquired in future by the company.

As per the formula, Reliance Jio had to pay SUC at a rate of 2.88 per cent as against 5 per cent currently, Aircel at 2.83 per cent (3.24 per cent) and Airtel at 3.8 per cent (4.9 per cent).

At present, government collects SUC of around Rs 7,500 crore annually from all telecom operators.

“Gradually, our effort is to achieve at least 3 per cent uniform rate and in future we may even go lower as recommended by Trai,” the official source said, but added that though SUC rates will come down, the actual realisation will increase with fresh spectrum purchase.

Before 2010, there was only 2G spectrum and hence the calculation of revenue was easy. But the process became complex after new frequencies were allocated to companies for services like 3G and 4G.

A technical panel of DoT has said it is difficult to segregate revenue of companies holding airwaves in multiple bands.

The government, in January 2014, decided to cap SUC at a flat 5 per cent for spectrum that was to be procured in the future auctions.

At that point, telecom operators were asked to pay the weighted average of their existing SUC (on the old rate of 3-8 per cent) based on the quantum of spectrum they hold and five per cent if they acquire new spectrum.

The today’s decision of panel has no impact on Vodafone, Idea Cellular and other companies which do not hold spectrum in 2300 Mhz and 2600 Mhz bands that were auctioned in mid-2010.

Vodafone at present pays around 4.8 per cent SUC and Idea 4.5 per cent of revenue earned from telecom services.

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