More reports on: Government policies

Telecom Commission drops spectrum usage charge to 3%

08 June 2016

The Telecom Commission has proposed a lower 3 per cent spectrum usage charge (SUC) on operators' adjusted gross revenue (AGR) for all bands against the flat 5 per cent SUC it had decided on in January 2014.

The panel also decided that the payout for carriers in any case will not be lower than what they are currently paying at the existing rate to prevent loss of revenue to the government.

"For future auction, the Telecom Commission stood by its earlier recommendation to levy 3 per cent SUC," an official source said.

The SUC will now be calculated using a weighted average formula based on the total spectrum holding.

The proposal to reduce spectrum usage charges will be limited to the upcoming auction and for all future auctions, the government will decide on user charges later.

The draft proposals and other issues related to the upcoming auction will now have to be approved by the union cabinet. If passed, it would be a big boost to telecom service providers hard hit by spectrum acquisition charges and other issues like creating telecom infrastructure.

The move will result in lower spectrum user charges for companies while protecting the government's revenues, and as a result, no one will be impacted, said the official. The annual SUC collection by government as of now goes up to Rs7,000 crore.

If approved, the decision could help operators such as Bharti Airtel, Aircel and Reliance Jio (then Reliance Communications) that had bought the 2,300MHz in 2010 auctions. According to government sources, Reliance Jio will be the biggest beneficiary with its SUC coming down from 5 per cent to 2.88 per cent.

Airtel's SUC will come down from 4.90 per cent to 3.74 per cent and that of Aircel from 3.24 per cent to 2.83 per cent.

Before 2010, there was only 2G spectrum and hence, calculation of revenue was easy. But the process became complex after new frequencies were allocated to companies for services like 3G and 4G.

A technical panel of the Department of Telecom has said it is difficult to segregate revenue of companies holding airwaves in multiple bands.

The SUC has been one of most contentious issues of late. Reliance Jio has opposed levying uniform SUC rates as suggested by Trai as it pays only 1 per cent on its spectrum in the 2300 Mhz band (broadband wireless access) and the proposal to levy 3 per cent would put extra burden on the company.

In January 2014 the government  decided to cap SUC at a flat 5 per cent for spectrum that was to be procured in future auctions.

At that point, telecom operators were asked to pay the weighted average of their existing SUC (on the old rate of 3-8 per cent) based on the quantum of spectrum they hold and 5 per cent if they acquire new spectrum.

For BWA spectrum holders like Reliance Jio, Airtel and Aircel, the same method was put in place, considering 1 percent SUC on airwaves held by them in 2300 Mhz band.

With the new formula, operators will have to pay the weighted average of the current rates and 3 percent for spectrum to be procured in future.

The companies that do not procure spectrum in future auctions will continue to pay the existing rate.

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