DoT works out revenue impact on flat spectrum charge

| Updated on: Dec 16, 2013




Cabinet wants revised fee to be finalised before auction starts

Incumbent mobile operators stand to save Rs 2,600 crore over a ten year period if the Government reduces the spectrum usage charges to 5 per cent.

According to calculations done by the Department of Telecom, if 3 per cent flat spectrum usage rate is applied for the six licences expiring in 2014-15, the Government’s revenue would be less by Rs 196 crore and Rs 220 crore for the next two fiscal years, respectively.

Spectrum usage fee

DoT will present these calculations to the Finance Ministry to finalise the usage fee for spectrum. The Cabinet last week had ordered DoT to finalise the revised charges before the auction is held. The auction will start on January 23 and a decision on spectrum charge is crucial from the point of bidders.

Under existing rules, operators are required to pay a fee for using spectrum which ranges between 1 per cent and 8 per cent of annual revenues depending on the quantum of spectrum the operator holds. TRAI proposed to change this to a flat fee of three per cent irrespective of the quantum of spectrum.

Broadband Vs incumbent players

This has been objected to by broadband players such as Reliance Jio as they pay only one per cent as the spectrum charge and, therefore, would end up paying more if the fee is fixed at three per cent. Incumbent players, including Vodafone and Airtel, however, want the fee to be flat as they pay as much as eight per cent now.

Mobile operators collectively paid about Rs 4,500 crore as spectrum charges in 2012-13.

DoT has not calculated the impact of imposing a flat fee on broadband players because it does not have any data on the potential revenue that these players could generate.

Most of the operators who won spectrum in 2010 have not started rolling out services and are currently not paying revenue share to the Government.

Potential bidders' plea

Potential bidders said that the Government should take a decision quickly to enable them to make up their strategy.

“If there is a revenue impact then DoT can fix a slightly higher fee that would make it a revenue neutral decision. But a flat usage charge would boost the bidders’ confidence and the Government could end up making more money if the bids get aggressive,” said an industry representative requesting anonymity.

This is also important for mergers & acquisitions and spectrum trading because a fee independent of the quantum of spectrum will encourage players to hold higher amount of airwaves, which in turn would result in better quality of service for users.

Operators currently pay between 1 and 8% of revenue as SUC

TRAI wants a flat fee of 3%

Incumbent players in favour of a flat fee

Broadband player against the revision as they pay only 1%

Decision important for bidders in next round of auction


Published on March 12, 2018

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