Hike in spectrum usage charges likely to net extra Rs4,000 cr

Hike in spectrum usage charges likely to net extra Rs4,000 cr

New Delhi: The department of telecommunications, or DoT, is considering increasing the spectrum usage charge paid by telecom operators by 1 percentage point, according to two DoT officials.

The move is expected to earn the government around Rs4,000 crore more per year, according to two analysts tracking the sector. This is apart from additional earnings the government will get from rolling out high-speed 3G, or third-generation, spectrum early next year. The analysts did not want to be named as they are not authorized to speak to the media.

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The DoT officials said the government is now looking into its proposal.

Telecom service providers pay between 2% and 6% of their adjusted gross revenue, or AGR, to the government as per the universal access services (UAS) licence agreement with DoT. The spectrum usage charge depends on the amount of spectrum each operator has in each of the circles it operates in.

In December, the Telecom Regulatory Authority of India, or Trai, had agreed to endorse DoT’s recommendations on hiking the spectrum usage charge. The plan, however, was not implemented as it was dependent on the auction of 3G spectrum, which got delayed by almost a year due to differences between the ministry of defence and DoT over the vacation of spectrum as well as the general election in April-May.

The decision to increase the charge comes with a large amount of uncertainty as the telecom regulator is already looking into the 2G spectrum committee report that discusses a range of issues, including the delinking of spectrum from the licence and the auctioning and trading of spectrum.

As per the telecom commission’s decisions in December, phone operators offering only 3G services would be liable to pay a flat 3% of their AGR. In the case of mobile phone service providers already offering 2G services and looking to offer 3G services, there would be no additional charge as they will already be paying a higher levy after the hike in spectrum-linked fees.

India is the second largest telecom market in the world after China and the fastest growing market. By end-October, the country added at least 16 million subscribers taking the total number to 525.65 million, including 488.4 million wireless or mobile phone subscribers.

But the rate of growth of DoT’s earnings from spectrum has fallen from 79% in 2006-07 with a revenue of Rs2,090.39 crore to 13% in 2008-09 with revenue of Rs3,454.55 crore.

“The arbitrary pricing of spectrum, which is not based on any study or analysis, is a bad idea," said Mahesh Uppal, a regulatory expert and a director at Com First (India) Ltd, which deals with telecom policy. “Any price on spectrum determined by means other than market forces is a bad idea as it comes with other arbitrary influences, including bureaucratic or political. The other argument is that spectrum pricing linked to revenue does not give any incentive for the efficient use of what is a limited national resource," he said.

An executive with a new telecom operator, who did not want to be named due to the sensitivity of the issue, questioned the fairness of the proposal.

“What about those who do not get 3G spectrum and only have 2G spectrum? Also, the new operators will have to pay a higher fee while the incumbent operators have been paying the lower fee for so many years," he said.

The country’s largest mobile operator, Bharti Airtel Ltd, for instance, paid Rs316.87 crore as spectrum usage charge for the quarter ended September.

Graphics by Sandeep Bhatnagar / Mint