DoT proposes telcos pay more of spectrum-linked revenue

DoT proposes telcos pay more of spectrum-linked revenue

New Delhi: The department of telecommunications, or DoT, the Union government’s telecom policymaking body, has decided to increase the share of annual revenues phone firms in India pay the exchequer by a percentage point for those vested with rights to use up to 8.2MHz of spectrum and by two percentage points for those in excess of that threshold.

Indian mobile phone service firms are levied annual fees of between 2% and 5% of their gross revenues every year currently, depending on the rights to spectrum, or radio waves, that they have. The new rates, decided at a meeting of the telecom commission, the top body at DoT, on Tuesday, will be effective from 1 January, telecom secretary Siddhartha Behura told reporters.

DoT also decided to approve the recommendations of an interministerial committee tasked with arriving at a revenue-sharing formula for phone firms offering current voice-dominated phone services (also called second-generation, or 2G, services) and so-called third generation, or 3G, services that include high-speed data, Internet access and video content.

India aims to auction 3G licences in January.

Phone operators offering only 3G services will pay 3% of annual revenues, while for those firms offering both 2G and 3G services, there will be no additional charge as they will already be paying a higher levy after Tuesday’s hike in spectrum-linked fees.

The telecom commission’s decisions still need final approval from communications minister A. Raja.

The new, higher charges could affect profits of market-leading mobile phone service firms, an analyst said. “The hike in charges was coming for a long time and was expected. It is a negative as with the higher charges, they will have to pay more. This may lead to some pressure on the margins of the telecom companies," said Harit Shah, analyst at Angel Broking Ltd.

The firms may have to pass on the hike to consumers in the short term, but there will not be much of an impact on tariffs in the long term, Shah said.

India’s leading phone firms, Bharti Airtel Ltd, Reliance Communications Ltd, Vodafone Essar Ltd and Idea Cellular Ltd, have spectrum rights in excess of 8.2MHz in big cities, which are designated as licence areas, and also in some prosperous states such as Maharashtra.

The third item on the agenda of the telecom commission was related to a one-time fee to be paid by phone firms with more than 6.2MHz of spectrum. The commission decided to defer this by about a fortnight as the Planning Commission and the department of industrial promotion and policy wanted time to look into the proposal, a DoT official said, asking not to be named.