The Cabinet has approved the Empowered Group of Ministers? (EGoM) proposal to impose one-time spectrum fee on existing operators.
Earlier, EGoM had proposed that the existing GSM service providers should pay a fixed licence fee for the spectrum held by them in excess of 4.4 MHz, while CDMA operators were to pay a fixed licence fee for the spectrum held by them beyond 2.5 MHz prospectively for the remaining period of their licences.
The one time licence fee to be paid by the GSM and CDMA operators is to be linked to the auction determined price in the forthcoming spectrum charges.
The cabinet decision will impact operators offering GSM services participating in the forthcoming spectrum auction. However, with operators providing CDMA services withdrawing from the upcoming spectrum auction, the decision will have no bearing on them.
Reportedly, the Department of Telecommunications is working on a proposal to come up with a separate benchmark for one-time licence fee to be imposed CDMA operators.
Commenting on the government?s decision to approve one-time licence fee to be paid by the existing operators, Prashant Singhal, Partner in member firm of Ernst & Young Global, says, ?The decision to levy one-time fee on excess spectrum held by incumbents, is going to distress the sector even further, particularly at a time when the profits and margins are under pressure owing to stiff competition and interest costs on the debt they took to pay for 3G/BWA spectrum. The estimated outgo for pan-India GSM operators is estimated at Rs 192.33 billion (with retrospective fees at Rs 24.11 billion and prospective at
Rs 168.21 billion). Though the retrospective one-time spectrum fee for CDMA operator is nil, the approach to compute prospectively is open. The mechanism to conclude one-time spectrum fee is in itself contentious.?
He adds, ?Using 3G pricing as a benchmark for the spectrum auctions in November this year and future, has several underlined flaws. Substantiating which, the 2G spectrum auction is highly likely to witness muted response from final GSM bidders, much like the CDMA (2.5 GHz) flop show. At such high reserve, the auction may not result in pan-India discovered price for 4.4 MHz or GSM spectrum, rendering the one-time fee computation undetermined and players involved in wishy-washy. The recommendation on spectrum sharing where, both the players would have to pay spectrum usage charge at the slab rate applicable on the entire combined spectrum holding, is going to get a thumbs down from the industry.?
