Indian telecom operators such as Vodafone, Idea Cellular, Bharti Airtel, Reliance Communications, etc. will benefit from the new spectrum usage charge (SUC) of 5 percent of the annual gross revenue on all new airwaves acquired in the auction. There is no change in Reliance Jio for its 4G venture.
The decision on new SUC will pave way for a better spectrum auction next month. Already, the presence of Reliance Jio Infocomm is likely to intensify the bidding process.
Earlier, the SUC, which is levied annually by the government as percentage of revenue earned by telecom companies from telecom services, varied between 3 to 8 percent in case of mobile operators.
Telecom regulator TRAI had earlier suggested that the annual SUC be set at a flat 3 percent of companies’ revenue for the spectrum they buy from auctions.
A section of the telecom industry welcomed the new SUC, recommended by the Empowered Group of Ministers (EGoM).
The SUC regime announced today offers a reasonable compromise for all the main stakeholders. PwC India says government may see fiscal revenue from SUCs slip a bit in the first year, but long term revenue should go up as industry revenues continue to grow.
Major operators who currently pay around 8 percent SUCs will see relief from the new guidelines as more and more of their spectrum holdings qualify for the lower 5 percent threshold, and players who bought BWA spectrum earlier remain unaffected.
“Clarifying the SUC regime at this time before the auctions in early February is helpful for operators who want as much certainty as possible for their bid strategies,” said Mohammad Chowdhury, Leader, Telecom, PwC India.
As per the recommendation of the Empowered Group of Ministers (EGoM) today, existing telecom operators will have to pay the weighted average of their existing usage charge, and 5 percent if they acquire new spectrum in February.
“For all new spectrum, which will be sold, it will be 5 percent but it will be charged at weighted average. There is no protection of revenue. In this process, if the Government loses some revenue, doesn’t matter. Ultimately consumers have to be benefited,” said telecom minister Kapil Sibal.
The decision will go to Cabinet for final approval.
Spectrum usage charge for broadband wireless access (BWA) spectrum will continue to remain at one per cent as the Government has not amended the existing contractual obligation.
Reliance Jio Infocomm has license to operate in 22 circles. However, they will have to pay a usage charge of 5 percent for the new airwaves they acquire. These companies have to report separately the revenue earned from BWA airwaves and new spectrum.
Last month, industry association Assocham and several telecom operators recommended to lower the SUC charges.
Assocham said in order to have a successful spectrum auction in January, the government should implement a flat spectrum usage charge as operators will be “discouraged” to buy airwaves if the levy continues at the current escalated regime.
At present, the Government gets a pan-India average spectrum usage charge of 4.8 per cent on airwaves allocated till date which has now been fixed at 5 percent. Hence, there will be no adverse impact on the existing revenue.
The Telecom Commission has recommended three options to EGoM headed by Finance Minister P. Chidambaram — a levy of 3 per cent with weighted average, 5 percent with weighted average and continuation of the existing regime, PTI reported.
SUC currently ranges from 3 to 8 per cent for mobile operators, while for firms with Broadband Wireless Access (BWA) spectrum such as those of Reliance Jio Infocomm Ltd and Tikona, the fee is 1 per cent.