Four GSM players, in a letter to the Department of Telecommunications (DoT), the Prime Minister?s Office and the Empowered Group of Ministers, have stated that a uniform spectrum charge (SUC) of 1 per cent be implemented across the industry to ensure the success of the next round of spectrum auction to be held in January 2014.
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The top executives of Bharti Airtel, Vodafone India, Idea Cellular and Uninor have requested the government to consider introducing a flat SUC. In the letter, four operators have stated that in case the government is not in a position to introduce flat SUC immediately, it should at least levy a uniform SUC to all technologies. For example all LTE (4G) technology deployment across any spectrum band should attract same current SUC of 1 per cent.
Currently, the government levies SUC between 3 per cent and 8 per cent of revenue earned by the operators, depending on the quantum of spectrum held by them. Earlier, the Telecom Regulatory Authority of India had suggested that the operators should be asked to pay a flat SUC of three per cent of their total revenues if the players have obtained spectrum by participating in a spectrum auction. However, those operators who have received spectrum by paying price set by the government should be charged a flat SUC of five per cent.
The executives? letter states that a decision on the SUC before the forthcoming auction is important as the rate will have to be factored into the bids to be made by operators. ?We believe policy makers should disentangle this web of opacity with clarity, speed and courage. Exercising this right choice will restore investor confidence, have a far-reaching impact on other sectors of the economy and result in a successful auction. Not taking strong and affirmative action at this critical juncture could result in even more opacity and an auction design that is flawed and discriminatory,? the letter states.
The operators have further stated that in case a decision is not taken on the issue before the auctions, the operators might not bid aggressively. According to the operators, the loss due to spectrum remaining unsold is going to be higher for the government. For example, about 167.50 MHz of spectrum in the 1800 MHz band remained unsold in the November 2012 spectrum auctions. Even taking today?s reserve prices as the benchmark the loss to the government on account of this unsold spectrum is about Rs 49 billion upfront and about Rs 19.60 billion a year, far higher than the estimated annual loss of Rs 2.5 billion by DoT on account of the flat SUC.
Meanwhile, the Union cabinet has asked DoT to finalise the revised structure of the SUC before it conducts the next round of spectrum auction in January 2014. Earlier, the Telecom Commission had stated that it would take a decision on the proposed uniform SUC after consulting the Ministry of Finance. The government has stated that it would follow the existing rules of SUC for the upcoming spectrum auction, unless it manages to arrive at final decision on the issue prior to the spectrum auctions.
