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Cabinet okays one-time fee on telcos

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Government is hoping to garner about Rs.31,000 crore from this move

Communications and Information Technology Minister Kapil Sibal (right), and SecretaryR. Chandrashekhar at the media briefing inNew Delhi on Thursday. —PHOTO: V. SUDERSHAN
Communications and Information Technology Minister Kapil Sibal (right), and SecretaryR. Chandrashekhar at the media briefing inNew Delhi on Thursday. —PHOTO: V. SUDERSHAN

The Centre, on Thursday, approved a proposal to levy a one-time fee on telecom companies holding spectrum beyond a specified limit, to garner almost Rs.31,000 crore.

The move may hit Bharti Airtel and Vodafone the most. Other operators such as Idea Cellular, Reliance Communications, MTNL and Tata Teleservices would also be impacted by this levy, which may translate into higher tariffs for consumers.

Finance Minister P. Chidambaram said the Union Cabinet, headed by Prime Minister Manmohan Singh, accepted an Empowered Group of Ministers’ recommendations that mobile phone companies be charged a one-time fee for the excess spectrum they owned beyond a cap set by the telecom regulator.

“Spectrum will be charged for holdings beyond 4.4 (Mhz) in GSM on auction-determined price. For GSM above 6.2 (Mhz), a one-time charge will be levied from July, 2008, onwards,” Mr. Chidambaram said here.

The ministerial panel had suggested that GSM-based telecom operators be asked to pay for airwaves they hold beyond 4.4 Mega-Hertz (Mhz) at an auction-determined price, while CDMA carriers pay for holdings beyond 2.5 MHz for the remaining validity of their permits.

Telecom Minister Kapil said that operators would have to pay two set of charges. “Prior to January 1, one price (and) after January 1 auction-determined price will be levied (for rest of the licence period),” Mr. Sibal said.

Telecom operators were earlier given licence for Rs.1,658 crore, which also included initial allocation of 4.4 Mhz spectrum and promise of additional 1.8 Mhz spectrum, amounting to total of 6.2 Mhz spectrum, after acquiring certain number of customers on their network.

GSM operators holding more than 6.2 MHz of spectrum will pay a retroactive fee for the airwaves from July, 2008, till the end of this year.

The price would be the 2001 entry fee duly indexed using State Bank of India Prime Lending Rate divided by 6.2. He added that telecom operators would be given an option to surrender spectrum beyond 4.4 Mhz in GSM.

Telecom operators will be allowed equated annual instalments at interest rate of 9.75 per cent for the balance period of licence. However, the last instalment should be paid not later than 12 calendar months prior to the expiry of the licence. Telecom operators will also have the option of full upfront payment or pre-payment of one or more instalments.

The government, however, could not decide on charging one-time spectrum on CDMA players as there are no bidders for scheduled auction of CDMA spectrum.

As per the Department of Telecommunications’ estimates, if the spectrum is sold at the minimum price fixed by it, then the government will get Rs.30,927 crore from the one-time fee. This estimate includes around Rs.5,900 crore from CDMA players having spectrum beyond 2.5 Mhz.

Mr. Sibal hoped his ministry’s calculations of garnering about Rs.31,000 crore from the surcharge would be met.

He said the government would determine the basis of price CDMA players would have to pay in the interim before the auction took place. The auction-discovered price will then be paid and whatever payments are made will be adjusted towards the auction-determined price.

“We will take the decision before because the payment has to be started from January 1 ... whatever interim decision has to be taken has to be taken before January 1,” he said.

DoT estimates show that telecom public sector unit BSNL and MTNL have to jointly shell out Rs.11,818 crore after this decision.

These PSU have written to the Telecom Ministry for relief but Mr. Sibal said “we will be separately coming to the Cabinet on that.”

Telecom companies have opposed the fee, arguing it will hurt them at a time when their profits are under pressure from stiff competition and interest costs on the debt they took in 2010 to pay for third-generation spectrum.

On the issue of allotment of initial spectrum to operators who have paid the requisite fee but have not been allotted spectrum so far, the Cabinet decided that the claim of such company for allotment of 4.4 MHz of spectrum would be considered after completion of the auction process, subject to availability of spectrum. — PTI


  • Telcos argue that it will hurt them when their profits are under pressure

  • GSM above 6.2 Mhz will be levied

    one-time fee from

    July, 2008



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