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Business News/ Politics / Policy/  Panel decides on retrospective charge on excess spectrum
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Panel decides on retrospective charge on excess spectrum

Tweaks decision made last week to levy only prospective charge on telcos for 2008-2012

Thursday’s decision would mean the government stands to make an additional amount of money above the original minimum `27,000 crore approximately that was envisaged in the earlier meeting. Photo: Pradeep Gaur/Mint (Pradeep Gaur/Mint)Premium
Thursday’s decision would mean the government stands to make an additional amount of money above the original minimum `27,000 crore approximately that was envisaged in the earlier meeting. Photo: Pradeep Gaur/Mint
(Pradeep Gaur/Mint)

New Delhi: The ministerial panel looking into issues related to spectrum tweaked its decision, made last week, to levy only a prospective charge on telcos with spectrum in excess of 4.4MHz and decided to apply a retrospective charge over and above this for the four years between 2008 and 2012, but only for telcos holding spectrum in excess of 6.2MHz.

The complex tweaking, which will marginally increase the payout for telcos Bharti Airtel Ltd, Vodafone India Ltd and Idea Cellular Ltd that offer services on the dominant GSM platform, seems a doff of the hat to the original opinion given by India’s top legal officer Goolam E. Vahanvati, who recommended levying a charge on telcos with spectrum in excess of 6.2MHz in 2008, and refused to offer a second opinion on the ministerial panel’s decision made last week.

“Everyone who had above 6.2MHz of spectrum, what is called contracted spectrum, will pay, retrospectively, for the four years till the auction price comes into effect. After that, the operators will pay for spectrum they have above the 4.4MHz start-up spectrum, based on the auction discovered price," a senior department of telecommunications (DoT) official said, speaking on condition of anonymity. The amount to be paid retrospectively will be 1,658 crore, the price discovered in the auction in 2001, indexed to the prime lending rate of State Bank of India, starting 2001 and ending May 2008.

This would mean the government stands to make an additional amount of money above the original minimum 27,000 crore, approximately, that was envisaged in the earlier meeting.

The tweak does not affect telcos offering services on the CDMA platform that will be charged prospectively for any spectrum they hold in excess of 2.5MHz.

The ministerial panel, however, did not discuss the refarming issue that was decided by the Telecom Commission.

The final decision on this has to be taken by the cabinet.

This 27,000 crore estimation is based on the reserve price of 14,000 crore for 5MHz set for the coming 1,800MHz spectrum auction. This means that the government would make a minimum of 50,000 crore from the auction, if no airwaves remain unsold.

The prospective price is payable on a pro rata basis for the remaining number of years that the telcos have left of their licence, taking into account that the final auction price is for spectrum with a 20-year validity. Operators such as Bharti and Vodafone will see some of their licences expire in another two years.

CDMA operators will have to pay for spectrum they hold above 2.5MHz. However, the retrospective decisions do not affect them as they do not have spectrum above the contracted 5MHz.

The decisions are not expected to affect the coming auction, the DoT officials said, adding that there would not be any extension on the last date for applications.

Companies interested in bidding for spectrum in the 1,800MHz band in the coming auction, slated to start on 12 November, have to submit their applications by Friday.

On refarming, officials said the issue had been explained to the ministers but there was not enough time for the empowered group of ministers (eGoM) to take a final call.

On Wednesday, the Telecom Commission, India’s highest telecom policymaking body, recommended that all spectrum in the 900MHz band held by older operators—including Bharti Airtel, Vodafone India and Idea Cellular—be taken back and replaced with spectrum in the 1800MHz band once their licences come up for renewal, potentially leading to a significant increase in costs for the companies.

The affected operators, however, will have the opportunity to bid for the spectrum in an auction early next year, before their renewal date (in late 2014).

The government has kept enough spectrum in the 1,800MHz band available for the telcos to replace the airwaves.

The move has been opposed by the GSM operators, who say the move will lead to investments of around 1.5 trillion becoming redundant.

The issue is expected to come up in the next meeting of the eGoM and will be cleared before the auction begins.

The earnings for the government from the telecom sector, including from the one-time fee, refarming and both spectrum auctions (if the second one happens before March) could mean earnings of more than 1 trillion this fiscal.

The eGoM also reiterated its decision to allow adjustments to the 1,650 crore entry fee paid by the telcos—which will lose their licences due to the 2 February, Supreme Court ruling—against the payout, if they win spectrum in the coming auction. However, this adjustment or refund will be dependent on the outcome of the ongoing investigation of the alleged 2G scam.

The apex court had cancelled 122 telecom licences and spectrum allocated to nine companies and also said that the government should auction the freed-up spectrum.

The telcos will lose their licences one week from the date of allocation of spectrum won in the auction.

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Published: 18 Oct 2012, 08:36 PM IST
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