DoT to rethink pricing; flat fee likely to prevail

DoT to rethink pricing; flat fee likely to prevail
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First Published: Tue, Aug 26 2008. 11 40 PM IST
Updated: Wed, Aug 27 2008. 08 53 AM IST
New Delhi: The department of telecommunications, or DoT, is rethinking how it would get revenue from spectrum being used by mobile phone companies and is looking at replacing a model where the revenue-share percentage typically increases with use of airwaves with one where the companies pay a flat fee.
The move comes after the Planning Commission, the Indian government’s apex planning body, asked DoT this month to re-examine the criteria. Indian telecom firms currently share between 2% and 6% of their gross revenues with the government and the exact percentage of the levy is based on the quantum of spectrum that a phone firm got rights to use in providing its services.
In a break from the past, DoT plans to auction, later this year, licences for so-called 3G, or third generation, mobile phone services, and the government expects to raise between Rs30,000 crore and Rs40,000 crore from the sale, equivalent to some 75% of the Indian government’s revenue deficit.
Until now, DoT allocated spectrum rights based on the number of subscribers that a phone company had with service providers paying an escalating percentage of their revenues based on their use of spectrum, DoT secretary Siddhartha Behura explained at a Planning Commission meeting attended by deputy chairman Montek Singh Ahluwalia.
Ahluwalia “has asked the telecom secretary to review the revenue sharing formula so that players get more competitive rates and also get the incentive for technology modernization,” said one Planning Commission official who didn’t want to be identified.
Behura told Mint that a committee, under a DoT additional secretary, has been formed to suggest changes in the revenue sharing formula. The Planning Commission favours a flat revenue-share amount, he added.
Guidelines for 3G services were announced earlier this month with the spectrum auction expected to happen by the end of 2008. The average revenue per user, or Arpu, in 3G services is typically higher than that of current voice-led mobile phone services, or 2G services, because of increased use of video and audio, Internet and email access.
In a recent interview, Manoj Kohli, chief executive and joint managing director, Bharti Airtel Ltd, India’s biggest mobile phone services firm by subscribers, said 3G will help grow non-voice revenues at Airtel. It “offers exciting opportunities as wireless broadband is a very important element. The focus will be more on non-voice and data services such as content... the revenues out of non-voice area will increase,” he had said.
At least one telecom expert interpreted the government move as one designed to maximize revenues to the exchequer upfront.
“Profits of telcos are getting better and better. On an economic angle, the government may want to charge a higher rate (through auctions) initially,” said Alok Shende, principal consultant, Accendia Consulting.
sangeeta.s@livemint.com
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First Published: Tue, Aug 26 2008. 11 40 PM IST