Coming just in time before the spectrum auction scheduled to be held on February 3, the Empowered Group of Ministers (EGoM) on Monday approved a spectrum usage charge (SUC) of five per cent of the annual gross revenue on all the new airwaves acquired in auction. Existing telecom operators will have to pay the weighted average of their existing SUC, and five per cent if they acquire new spectrum. For the broadband wireless access (BWA), EGoM retained the SUC at one per cent.
“For all new spectrum, which will be sold, it will be five per cent but it will be charged at weighted average. There is no protection of revenue. In this process if Government loses some revenue, doesn’t matter. Ultimately consumers have to be benefited,” said Telecom Minister Kapil Sibal. He further added, “We have not made any amendment in any contractual obligations. BWA players will continue to pay 1 per cent SUC and if they acquire new spectrum, they will have to pay 5 per cent.”
Now after getting a clearance from the EGoM, Cabinet will now take the final decision on the levy. Hence, all the new airways acquired would require the operators to pay five per cent of the their annual revenue as SUC. These companies now would have to report separately the revenue earned from BWA airwaves and new spectrum. “Ultimately it is consumers who need to benefit. Big players (charges) will come down. It will not affect new players,” Sibal said.
As per sources, the Government, currently, gets pan an average SUC of 4.8 per cent from all over the country on spectrum allocated till date. Now with SUC being fixed at five per cent, there will be no adverse impact on the existing revenues of the operators.
Earlier, the Telecom Commission has recommended three options to the EGoM headed by Finance Minister P Chidambaram which included a levy of three per cent with weighted average, five per cent with weighted average and continuation of the existing regime.
GSM firms such as Bharti Airtel, Vodafone and Idea Cellular have locked horns with Mukesh Ambani-led Reliance Jio Infocomm following the Telecom Regulatory Authority of India’s recommendation of a uniform SUC. The charge is levied annually by the government as a percentage of revenue earned from telecom services.
It currently ranges from three to five per cent for mobile operators, while for firms with BWA spectrum such as those of Reliance Jio Infocomm ltd, the fee is 1 per cent. “Rationalisation of issue, Nobody should be a loser,” Sibal added.
Further while highlighting the importance of the investment in the telecom sector, Sibal said, “With greater investment in the sector and successful auctions, the consumer will benefit. Successful auction means greater investment in the sector, results in efficiency of service and lowering of tariffs.”
Commenting on the decision of EGoM on SUC, Telecom Secretary MF Farooqui said, “The current levels of revenue will be protected. Operators are having spectrum at different values. When we take weighted average, it stands at 4.8 per cent. Now it will be fixed 5 per cent for new spectrum.”
Vodafone’s Resident Director and Assocham’s National Telecom Council Chairman, TV Ramachandran on the other hand, expressed disappointment at the decision and said, “Industry is disappointed that the SUC has been decided as high as 5 per cent for auctioned spectrum whereas Trai had recommended 3 per cent. This will further add financial burden on the industry.” The SUC should have been set at 1 per cent to ensure a level playing field with holders of BWA spectrum, he further added.
The representing authority of telecom operators, Cellular Operators Association of India’s Director General, Rajan S Mathews said the decision on SUC would be marginally useful for the industry. But while expressing concerns on its impact on the upcoming auctions, Mathews added, “Failure of the EGoM to transition to a flat rate of SUC is a failure to address both the anomalies as well as the disincentives for operators on acquiring more spectrum.”