Pitching for a flat spectrum usage charge (SUC) regime as opposed to the current escalating fee structure, telecom operators Bharti Airtel and Vodafone India have urged the telecom commission to provide clarity on the issue before January 27, the last date for withdrawing applications to bid in the coming auction. Operators feel the absence of a flat SUC is likely to discourage the industry from buying additional radiowaves either through auction or sharing process. The government is set to sell 2G spectrum starting February 3 and expects to earn Rs 40,000 crore from the auction. It is also preparing detailed guidelines for spectrum trading, which is expected to boost consolidation in the sector.
During the pre-bid conference held last month, the department of telecom (DoT) had indicated that it may stick to a slab-based spectrum usage charge, which is a percentage of an operators’ adjusted gross revenue paid annually to the government. Currently, spectrum usage charges are 3-8% for GSM operators. Charges go up as the spectrum holding increases, while broadband (4G) spectrum holders pay 1% SUC. Under this escalating charge regime, Vodafone believes that performing service providers are discouraged from buying spectrum because they end up paying a higher percentage rate on all of their revenues from all of their services.
?This is most disadvantageous for performing operators who are rolling out more aggressively and penetrating into various markets, including rural areas. As it is such operators, who will need more spectrum but may be discouraged from doing so, as it will be more expensive to purchase,? said Vodafone in a letter written to telecom commission chairman MF Farooqui.
The current SUC regime, thus goes against the national policy and connectivity objectives of the government as it punishes strong performance, Vodafone’s letter added.
Jyoti Pawar, regulatory director at Bharti Airtel, in a similar letter to the commission said that the government needs to decide the ?critical issue of SUC well before the start of auctions to enable the operators to take an informed decision?.
“Continuation with the escalating charge regime will cause untold and irreparable loss to the government exchequer,” Rajan Mathews of Cellular Operators Association of India had earlier stated in a letter to Farooqui.
The telecom commission, which is expected to take a decision on the matter on January 25, is likely to discuss three options. These include: either raising the SUC rate to a flat 3% for all spectrum holdings as recommended by Trai, keeping SUC on broadband spectrum acquired through 2010 auctions at 1% that would be reported separately or asking 4G spectrum holders, who buy 2G radiowaves in the February auction, to pay a weighted average of 2G spectrum at 3% and 4G spectrum at 1% as SUC. Trai, while recommending a flat SUC, said that differential SUC ?acts as a disincentive for any merger or acquisition, spectrum sharing and trading as well as in acquiring any additional spectrum. It also creates unwanted opportunities for arbitrage between bands and technologies likely to operate under a common unified licence.?
