No change in SUC being paid by BWA operators

The Empowered Group of Ministers (EGoM) on telecom, on Monday, decided on fixing spectrum usage charge (SUC) at 5 per cent of the annual gross revenue (AGR) for new radio waves that would be acquired in the forthcoming auction beginning next week.

However, for earlier acquired spectrum, operators will continue to pay the weighted average of their existing SUC, while there has been no change in the SUC being paid by the broadband wireless access (BWA) operators. The decision will now go to the Cabinet for final approval.

“The SUC shall be at the rate of 5 per cent on new spectrum…The big (old) players will benefit to that extent, small players will also benefit. We expect the (forthcoming) auction to be a huge success (after this decision) as it lowers the financial burden of big telecom operators (like Bharti Airtel and Vodafone India) and does not adversely impact new operators,” Telecom Minister Kapil Sibal told journalists after the meeting.

However, the EGoM, headed by Finance Minister P. Chidambaram, decided to retain the SUC for BWA operators at 1 per cent. But they will have to pay an SUC of 5 per cent for the new spectrum they acquire. These companies will have to report separately revenues earned from the BWA spectrum and the new spectrum.

The Telecom Minister hoped that with greater investment in the sector and successful auctions, the consumer would benefit. “Successful auction means greater investment in the sector, results in efficiency of service and lowering of tariffs…Ultimately consumers have to be benefited,” he noted.

Under the current regime, SUC varies from 3 per cent to 8 per cent for GSM operators. The GSM and BWA lobbies have been at loggerheads over the SUC issue, with the former demanding that there should be a uniform charge, while the latter has been opposing any tinkering with the prevailing rate. Interestingly, the Telecom Regulatory Authority of India (TRAI) had recommended a uniform 3-5 per cent SUC across sectors. “It is the issue of rationalisation…nobody should be a loser. More investment in the sector means more service and lower tariffs for consumers,” Mr. Sibal added.

Telecom Secretary M. F. Farooqui said if the Cabinet cleared the revised SUC, it would have no adverse impact on the government’s revenue.

“The current levels of revenue will be protected. Operators are having spectrum at different values. When we take weighted average, it stands at 4.8 per cent. Now it will be fixed at 5 per cent for new spectrum. The BWA operators will have to report separate revenue flows from existing spectrum and newly acquired spectrum,” he added.

Reacting to the EGoM’s decision, the Cellular Operators Association of India (COAI), which represents the GSM lobby, said it failed to address the critical issue of discriminatory SUC regime and demanded that a uniform SUC for all operators offering voice, video and data services should be implemented, as suggested by the TRAI.

“Although the suggested move could benefit the telecom operators marginally; serious issues still remain unanswered. Failure of the EGoM to transition to a flat rate of SUC is a failure to address both the anomalies as well as the disincentives for operators on acquiring more spectrum…The application of a weighted rate would not only complicate and irrationalise the levy structure, but would also act as a disincentive to mergers, acquisitions and spectrum sharing and trading. In turn, it will affect the potential investments to the sector, which is already facing hurdles presently. Opportunities for arbitrage that exist between different bands and technologies would continue to exist,” said COAI Director General Rajan S. Mathews.

Similarly, Associated Chambers of Commerce and Industry of India’s (Assocham) National Telecom Council Chairman and Vodafone India’s Resident Director T. V. Ramachandran expressed his disappointment at the EGoM’s decision as the rate cleared by the panel was higher than the level recommended by the TRAI. “Industry is disappointed that the SUC has been decided as high as 5 per cent for auctioned spectrum whereas TRAI had recommended 3 per cent. This will further add financial burden on the industry,” he added.

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