In a big move, the Department of Telecommunications (DoT) has announced that it is removing the 3 per cent floor on spectrum usage charge (SUC). The move is expected to sharply curtail the future outflows of the telcos. It is also expected that the sizable annual savings on SUC will likely drive stronger telco participation in the upcoming 5G spectrum sale.

The operators are likely to buy 400-500 units of low-priced 26 GHz mmWave spectrum, given its ample supply and now, no SUC. Spectrum in 26 GHz is suitable for high-speed, low latency applications, especially in crowded zones where large volumes of traffic have to be carried.

Earlier, under the auction rules, telcos had to pay SUC on a weighted average basis, depending on timing and quantity of airwaves held. The government has been reducing SUC over the years.  The 3 per cent floor, in particular, had been fixed by DoT in 2016 to protect government revenue as the SUC at that time had been lowered to encourage telcos to participate strongly in that auction.

With DoT deciding to do away with SUC compliance, the overall payout of the telcos is expected to drop down to 1-2 per cent of adjusted gross revenue (AGR).