Spectrum auctions: DoT scraps financial bank guarantees

Our Bureau New Delhi | Updated on October 13, 2021

Move to help telecom service providers maintain investments in the sector

The government, on Tuesday, notified that for future telecom spectrum auctions telecom service providers (TSPs) do not have to submit financial bank guarantee (FBG), in case of a successor bidder, to securitise annual spectrum instalment.

Cabinet decisions

This is in line with the last month’s Cabinet decisions on reforms and support packages for the telecommunications sector that will help the existing players survive, especially Vodafone Idea. Such a step by the government will help TSPs maintain their investments in the telecom sector. The notification released by the Department of Telecommunications (DoT) also said that it will appropriately address the eligibility conditions for participation in the auction so that participants have sufficient financial capacity.

“For spectrum auctions to be held in the future, the requirement for the successful bidder to submit a FBG of an amount equal to one annual instalment to securitise the instalment, and to submit Performance Bank Guarantee (PBG) for the rollout obligations, has been dispensed with,” it said.

In future auctions, access spectrum will be assigned for 30 years, but the tenure for radiowaves acquired in past rounds will remain unchanged, said the notification, adding that spectrum auctions will be held normally in the last quarter of every financial year, and whenever necessary, auctions can be held at shorter intervals too.

“Since in past auctions the reserve prices and bids were corresponding to the validity of 20 years, there will be no change in the tenure for spectrum acquired in the past auctions…For conducting the auction for spectrum with validity for 30 years, the Telecom Regulatory Authority of India (TRAI) recommendations have been sought for associated conditions like upfront payment requirements, applicable moratorium period after upfront payments, number of deferred payment instalments and other related modalities,” it said.

However, the spectrum purchase dues for the remaining period (post-surrender) will not be levied, it added.

Spectrum usage charges

Further, the DoT said that for spectrum acquired in future auctions, Spectrum Usage Charges (SUC) will not be levied, which means another win-win situation for TSPs. “In order to encourage spectrum sharing for better utilisation and efficiency, henceforth spectrum sharing will not attract an increase of 0.5 per cent in SUC rate,” it said.

The Cabinet had, on September 15, approved these relief packages that included a four-year break for the TSPs from paying statutory dues, permission to share scarce airwaves, change in the definition of average gross revenue (AGR) on which levies are paid, and 100 per cent foreign direct investment through an automatic route.

According to analysts, the steps taken will ensure optimised usage of resources, increase the operators’ accessibility, and enable accelerated investments in the sector.

Published on October 12, 2021

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