Under fire, Raja proposes new telco levy

Under fire, Raja proposes new telco levy

New Delhi: Faced with criticism that the Union government has lost billions of dollars in potential revenue from auctioning spectrum rights, the Centre has decided to charge a new upfront fee for use of spectrum, estimated to net the exchequer some Rs4,000 crore from payments by the country’s mobile phone service firms.

Spectrum refers to the airwaves used by phone firms to carry voice and data signals.

The new spectrum fee, described on Friday by communications and IT minister A. Raja as “one-time", will be levied on phone firms who use more than 6.2MHz of spectrum.

This cut-off, to be approved by the Telecom Commission, the government’s apex telecom policy-making body, on 11 November, will see the brunt of the new levy being borne by phone firms on India’s dominant wireless technology platform GSM, such as Bharti Airtel Ltd, Vodafone Essar Ltd and Idea Cellular Ltd, who use more than 6.2MHz spectrum in some of their licensed areas.

“The commission will also discuss the hike in fee by 1-2% of mobile operators’ revenue for using additional airwaves. In all, the government may get an additional Rs5,000 crore towards increased spectrum charges," Raja said. As per the proposal, the department of telecom plans to charge a fee of 1% of the telecom firm’s annual gross revenues for spectrum use of between 6.2MHz and 8MHz, beyond which an additional 1% will be levied.

Data from early this year shows that Bharti Airtel has been allotted spectrum rights more than 6.2MHz in all licensed areas other than West Bengal and the North-East. Rival Vodafone Essar has crossed that threshold in Delhi, Mumbai, Chennai and Kolkata, and states such as Gujarat, Karnataka, Punjab, Haryana, Uttar Pradesh and Rajasthan.

Other smaller firms have spectrum rights in excess of 6.2MHz only in some areas.

An analyst predicted an impact of between 3-5% on the earnings per share of the top phone firms due to the incremental revenue share fee. “The one-time fee can easily be amortized by these companies," said Kevin Trindad, senior analyst with KRChoksey Shares and Securities Pvt. Ltd.

Shares of Bharti Airtel rose 1.65% to Rs650, while the Idea Cellular scrip expanded 4.38% to Rs47.50 on BSE on Friday.