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Telecom spectrum usage charge now fixed at 5 percent

Posted on Jan 27 2014 | IANS

New Delhi, Jan 27 : Mobile telephone service providers that are all set to buy spectrum or airwaves in the Feb 3 auction will need to pay five percent of annual gross revenue as spectrum usage charge (SUC), an Empowered Group of Ministers (EGoM) decided here Monday.

"For all new spectrum which will be sold, it will be five percent but it will be charged at weighted average," Communications Minister Kapil Sibal told news persons after the ministerial meeting. The decision will now go to the union cabinet for its final nod.

The SUC for broadband wireless access (BWA) spectrum will continue to remain at one percent, Sibal said. He added that "ultimately it is consumers who need to benefit".

"The SUC regime announced today offers a reasonable compromise for all the main stakeholders. The government may see fiscal revenue from SUCs slip a bit in the first year, but long-term revenue should go up as industry revenues continue to grow.

"Major operators who currently pay around 8 percent SUCs will see relief from the new guidelines as more and more of their spectrum holdings qualify for the lower 5 percent threshold, and players who bought BWA spectrum earlier remain unaffected," Mohammad Chowdhury, leader, telecom, PwC India, said.

However, Rajan S Mathews, director general of Cellular Operators' Association of India - the GSM body, said the EGoM failed to offer transition to a flat rate of SUC, which in turn is a failure to address both the anomalies as well as the disincentives for operators on acquiring more spectrum.

"We believe that the application of a weighted rate would not only complicate and irrationalize the levy structure, but would also act as a disincentive to mergers, acquisitions and spectrum sharing and trading," he said.

"In turn, it will affect the potential investments to the sector, which is already facing hurdles presently. In addition, opportunities for arbitrage that exist between different bands and technologies would continue to exist," he added.

At a meeting held by the Telecom Commission Saturday, three options for SUC -- three percent with weighted average, five percent with weighted average and continuing with the current charge -- were discussed.

The SUC is levied annually as a percentage of revenue earned by telecom companies, which varies from 3-8 percent. The Telecom Regulatory Authority of India had earlier suggested a uniform 3-5 percent fee from April 1 across the telecom services for a successful next round of spectrum auction.

In 2012-13, the government's revenue collection from SUC was Rs.5,689 crore.

Eight telecom service providers have applied to take part in the second generation (2G) spectrum auction due Feb 3.

The companies are Reliance Communications, Reliance Jio, Bharti Airtel, Vodafone, Telewings, Aircel, Tata Teleservices and Idea Cellular.

The total spectrum to be put on auction is 46 MHz in 900 MHz band and 403.2 MHz in 1,800 MHz band.

The government expects to mop up Rs.40,874.50 crore from this spectrum auction.

The last date for withdrawal of applications has been extended by one day to Jan 28.

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