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Corporate Oct 8, 2012

Govt will collect Rs 27,000 cr on one-time spectrum charge

By Sindhu Bhattacharya

New Delhi: The Union government hopes to raise upwards of Rs 27,000 crore by levying a one-time charge, prospectively, on telecom companies which hold over 4.4 Mhz of GSM spectrum, or over 2.5 Mhz of CDMA spectrum.

In a decision which would have far-reaching consequences, the Empowered Group of Ministers (eGoM) today decided to levy a one-time fee on telcos which hold anything more these levels of spectrum, but declined to levy this charge retrospectively. Had the fee been applied since 2001, the government could have collected a whopping Rs 72,000 crore.

Sources say Rs 27,000 crore has been arrived at by taking the base price for 2G auctions at Rs 14,000 crore for 5 Mhz . AFP

Though this decision, to charge any spectrum a telco holds beyond 4.4 Mhz in GSM (and beyond 2.5 Mhz of CDMA) is liable to be legally challenged, the government has showed its intent to offer a level playing field to all telcos-new and old-but taking the cutoff point as 4.4 Mhz of GSM (and 2.5 Mhz for CDMA). All telcos which hold spectrum in excess of these cutoff limits will have to pay the price which is determined during the upcoming auctions.

Sources explained that had the cutoff limit for GSM spectrum been fixed at 6.2 Mhz (a demand made by some players), the government would have been forced to offer 1.8 Mhz spectrum for free to those telcos which have 4.4 Mhz but have been asking for 6.2 Mhz.

These sources also pointed out that not only will telcos find this decision creating a level playing field, they will also have the option of paying charges for excess spectrum in instalments. In any case, only between 25-33 percent of the Rs 27,000 crore which is being envisaged will accrue to the government in the first year.

That's because telcos can pay this amount in instalments, which would be calculated based on the number of years for which the licence of a telco is valid.

Sources said this figure of Rs 27,000 crore has been arrived at by taking the base price for 2G auctions at Rs 14,000 crore for 5 Mhz and the actual mop-up could be more, depending on the actual prices at which auctions happen in November-January, the designated time for the next round of 2G auctions.

Also, in another decision which may cheer telecom industry players, the government has decided to adjust the Rs 1,658 crore licence fee against payments due from those telcos who participate in the upcoming auctions. As long as a telco that lost the licence (following the February Supreme Court judgeent) does not have any criminal liability against it and is participating in the auctions, this amount would be adjusted. If such a telco is not participating, this amount would be refunded.

In its recommendations today, the eGoM appears to have ignored the advice of Attorney General GE Vahanvati, who had suggested that a one-time fee be levied retrospectively from July 2008 on spectrum allotted to telecom companies beyond 6.2 Mhz. Now, the Union Cabinet is slated to take a final call on the one-time fee issue before 19 October.

Earlier, the Department of Telecommunication (DoT) had suggested four options to the eGoM on spectrum fee - no charge; levy a one-time fee on all airwaves held by existing telecom companies; impose a fee on airwaves held beyond the start-up spectrum of 4.4 Mhz; or levy a fee on airwaves held beyond the contracted spectrum of 6.2 Mhz. The DoT said if the government charged operators for all spectrum, the exchequer would earn about Rs 72,000 crore; charging for spectrum beyond 4.4 Mhz would add about Rs 27,000 crore to the kitty and this is what the EGoM has recommended today.

Charging for spectrum beyond 6.2 Mhz, would fetch the exchequer over Rs 22,500 crore. In this case, the major players affected would have been Bharti, Vodafone and Idea.

by Sindhu Bhattacharya

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