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Cabinet approves one-time spectrum fee

The price of the spectrum would be determined on the basis of the price discovered in 1,800 MHz band auction
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First Published: Thu, Nov 08 2012. 12 07 PM IST
The government is likely to raise about `1 trillion from spectrum refarming, the 1800MHz airwaves auction and the one-time fee, according to telecom analysts. Photo: Mint
The government is likely to raise about Rs.1 trillion from spectrum refarming, the 1800MHz airwaves auction and the one-time fee, according to telecom analysts. Photo: Mint
Updated: Thu, Nov 08 2012. 11 43 PM IST
New Delhi: The cabinet on Thursday accepted recommendations made by the empowered group of ministers (eGoM) on the one-time fee for spectrum held by existing telecom operators.
The ministerial panel had suggested on 18 October that existing operators pay for holding spectrum above 6.2 megahertz (MHz) retrospectively from July 2008 till 1 January 2013. For spectrum above 4.4MHz, they would have to pay for the remaining period of their licences starting 1 January 2013.
The price of the spectrum would be determined based on the price discovered in the 1800MHz spectrum auction that is scheduled to begin next week. Operators holding spectrum in the more efficient 900MHz band will have to pay twice the reserve price for the 1800MHz spectrum as a one-time fee.
When the auction of the 900MHz spectrum is held later, the money paid by the operators would be adjusted based on the price discovered in the auction, according to an internal note prepared by the department of telecommunications for the cabinet, based on the eGoM’s decision.
As reported by Mint earlier this week, the government is estimated to make a minimum of Rs.30,000 crore from the decision. However, this estimate may come down marginally as the cabinet decided against charging the fee for CDMA operators for now. A decision on the fee for the CDMA spectrum will be taken in January.
The cabinet deferred the decision after telecom companies decided against participating in the auction of spectrum in the 800MHz band that was expected to start two days after the 1800MHz band auction concluded. The 1800MHz band auction is expected to begin on Monday.
Government earnings are likely to come further down as the cabinet has allowed public sector companies Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd exemption from paying the one-time fee.
This decision is likely to be contested by the private telecom operators in a court.
Communications minister Kapil Sibal said Tata Teleservices Ltd would be allotted start-up spectrum in Delhi, which the company has been demanding for years now.
For operators who have spectrum in both the 900MHz and 1800MHz bands, the initial 4.4MHz spectrum that an operator gets for free will be in the cheaper 1800MHz band.
Operators will be allowed to share the spectrum once it is paid for, but permission for sharing will only be valid for five years. The operators will also be allowed to pay for the spectrum in equated annual instalments at an interest rate of 9.75%, depending on the finance ministry’s approval.
They can also pay the full amount upfront or prepay the instalments as well as surrender spectrum that they don’t want to pay for. The price of the spectrum will be based on the 2001 price of Rs.1,658 crore for pan-India spectrum, indexed at State Bank of India’s prime lending rate of 3.75% till 2008.
The government is likely to raise about Rs.1 trillion from spectrum refarming, the 1800MHz airwaves auction and the one-time fee, according to telecom analysts.
The cabinet also allowed the sharing of spectrum, without any additional charge, among telecom service providers that have paid for spectrum beyond 4.4MHz in the GSM band. Both telcos would have to pay spectrum usage charge at the applicable rate on the entire combined spectrum holding, the government said in a statement.
In the case of an acquisition, when the acquired company holds spectrum against the entry fee paid, the acquirer would be required to pay the difference between the entry fee and the current auction-determined price proportionately for the remaining period of permit validity.
“In the event the government waives off payment of one-time spectrum fee for PSU (public sector unit) operators, they would get unfair advantage as they would be able to keep the spectrum and would also not be required to raise the tariffs, which is imminent in case of private operators once they make one-time fee payment to government,” said Hemant Joshi, partner at Deloitte Haskins and Sells, a consulting firm. “The bailout, in itself, would not help PSU operators as they have become marginal players and have deep-rooted structural, operational and financial problems.”
“The level-playing field, which the government is planning for operators by charging this one-time fees, would have many potholes or craters if bailout is given unless achievement of a long-term strategic interest of the country is linked to it, like in the case of Chinese government supporting China Mobile and Huawei,” he said.
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First Published: Thu, Nov 08 2012. 12 07 PM IST
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