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New Delhi: The Telecom Commission on Monday upheld its earlier recommendation of calculating spectrum usage charge (SUC) as per a weighted-average formula and added that the minimum SUC payable shall not be less than 3%.

The proposal will be sent to the cabinet for ratification next week, most likely on Wednesday. The move will impact Reliance Jio Infocomm and Aircel Ltd the most if approved by the cabinet; as per the department of telecommunication (DoT)’s earlier weighted average formula, they would have paid only 2.88% and 2.83%, respectively. The commission also recommended a 3% SUC rate for the upcoming spectrum auction across seven frequency bands.

A senior official, speaking on condition of anonymity, said, “A floor of what telcos are paying has been maintained and an additional floor of 3% has been recommended. The Telecom Commission stands on its earlier recommendation of weighted average formula for all bands for overall level playing field and to do away with arbitrage and revenue shortfall."

Bharti Airtel Ltd, which paid an SUC of 4.9%, will have to pay 3.8% as per the weighted average formula. Vodafone India will pay 4.8% and Idea Cellular Ltd will pay 4.5%. Also, as per the existing spectrum sharing guidelines, companies that share spectrum will have to pay an additional 0.5% SUC. “These figures are approximate figures and will be finalized once we go ahead with spectrum auction," said the official cited earlier.

Prashant Singhal, global telecommunications leader at EY, said, “I think this ideally should have been a fixed ad valorem rate as the weighted average formula makes it more expensive for telcos."

“The cabinet shall issue notice inviting applications after it ratifies the proposal and finalizes SUC rate, following which it will take 45-50 days to begin spectrum auction," the person cited above said.

The annual revenue for the government from SUC will go up if the Telecom Commission proposal is approved by the cabinet. Currently, the total annual SUC collection is 7,500 crore.

Mahesh Uppal, director at ComFirst (India) Pvt. Ltd, said, “The Telecom Commission has chosen an imperfect formula and focused more on revenues of the exchequer than urgent need to expand the data market by reducing regulatory burdens like SUC on telcos."

He added that it was unlikely that the move would hurt participation in the upcoming auction next month. “It will not really break or make the auction, because the SUC numbers are large but not when compared to the reserve price."

“For ease of doing business, a single rate is the best option. This formula makes it very complex. However, it is good that Telecom Commission did not adopt Trai’s weighted average formula which was even more complicated," said Hemant Joshi, partner at Deloitte Haskins and Sells.

The commission, which has representatives from the ministries of finance and commerce and the department of IT, was to decide whether to accept the telecom regulator’s suggestions of using alternative elements to determine the weighted average formula or have a flat SUC.

The cabinet in June okayed rules for spectrum auction in which airwaves worth 5.66 trillion will be put up for sale.

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