Industry News

TMCNet:  Govt eyes Rs.30,000 cr from one-time fee

[November 07, 2012]

Govt eyes Rs.30,000 cr from one-time fee

NEW DELHI, Nov 07, 2012 (Mint - McClatchy-Tribune Information Services via COMTEX) -- The government is likely to raise as much as Rs.30,000 crore by imposing a one-time licence fee on telecom operators -- a decision that was taken by an empowered group of ministers (eGoM) on spectrum last month.

The ministerial panel, headed by finance minister P. Chidambaram, had decided on 18 October that existing operators would have to pay for holding spectrum above 6.2 megahertz (MHz) retrospectively from July 2008 till 1 January 2013. They would have to pay for spectrum they hold above 4.4MHz for the remaining period of their licences from 1 January 2013.

The price of the spectrum would be determined based on the price discovered in the 1800MHz spectrum auction that is scheduled to begin next week. Operators holding spectrum in the more efficient 900MHz band will have to pay twice the reserve price for the 1800MHz spectrum auction as an one-time fee.

When the auction for the 900MHz spectrum is held later, the money paid by the operators would be adjusted based on the price discovered in the auction, according to an internal note prepared by the department of telecommunication (DoT) for the cabinet, based on the eGoM's decision. The note has been reviewed by Mint.

The note says that if the operators have spectrum in both the 900MHz and 1800MHz bands, the initial 4.4MHz spectrum that an operator gets for free will comprise the cheaper 1800MHz spectrum.

"In case of 900MHz band, till the auction determined price is available, the charges will be calculated by multiplying the reserve price of the 1800MHz by a factor of two (as recommended by the Telecom Regulatory Authority of India, or Trai). These charges will be adjusted with the auction-determined price later, when available," the note said.

Operators will be allowed to share the spectrum once it is paid for, but permission for sharing will only be valid for five years. The operators will also be allowed to pay for the spectrum in equated annual instalments at an interest rate of 9.75%, depending on the finance ministry's approval. They can also pay the full amount upfront or prepay the instalments.

"Licensees may be given the option to surrender spectrum beyond 4.4MHz/2.5MHz if they do not wish to pay one-time fee," the note said.

According to the auction rules, published in the notice inviting applications, the reserve price for the spectrum is Rs.14,000 crore for 5MHz in the 1800MHz band and 1.3 times this price for the spectrum in the 800MHz band. As reported by Mint on Monday, there is unlikely to be an auction in the 800MHz band as there are no applicants.

The auction for spectrum is set to begin on Monday, with DoT expected to hold a mock auction on Wednesday and Thursday. The price discovered will also be used to set the reserve price for the spectrum in the other bands. However, the telecom regulator is expected to deviate from its own recommendations on the price because of less demand for spectrum in the coming auction. Only five operators have applied for spectrum. Bharti Airtel Ltd, Vodafone India Ltd, Idea Cellular Ltd, Telewings (Telenor ASA with Sudhir Valia of Sun Pharmaceutical Industries Ltd as its Indian partner) and Videocon Industries Ltd have applied to take part in the auction in the 1800MHz band. Videocon and Tata Teleservices Ltd have withdrawn from the auction for spectrum in the 800MHz band.

"Together with the refarming money and also the auction money and the one-time fee, they (the government) should be able to hit the Rs.1 trillion mark," said a senior analyst with a consulting firm. He declined to be identified.

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