Telecom operators ask panel for uniform spectrum fee of 1 percent before auction

Top executives of leading GSM companies - Airtel, Vodafone, Idea and Uninor - have asked the Prime Minister's Office, members of EGoM on telecom, and the DoT to implement a uniform annual spectrum fee of 1 percent across the industry to ensure the success of the auction starting January 23.

"Implement a flat SUC (Spectrum Usage Charge) before the upcoming auction. In case the same is not immediately possible, apply a uniform SUC to all technologies, e.g. all LTE (4G) technology deployment across any spectrum band should attract same current SUC of 1 percent," the joint letter said.

Spectrum usage charge, which is levied annually by government as percentage of revenue earned by telecom companies from telecom services, varies between 3 and 8 percent in case of mobile operators.

This annual fee is currently 1 percent for firms broadband wireless spectrum including Reliance Jio Infocomm Ltd (RJIL) and Tikona.

"...the unresolved issue of SUC...has the potential to make or break the upcoming auction," the letter stated.

The Telecom Regulatory Authority of India has recommended implementation of 3 percent uniform spectrum usage charge across telecom industry with effect from April 1, 2014.

Reliance Jio Infocomm Ltd (RJIL), however, has opposed TRAI recommendation as it will increase the SUC applicable on company by two percentage points.

The joint communication made by Bharti Airtel CEO Gopal Vittal, Vodafone India CEO Marten Pieters, Idea Cellular Managing Director Himanshu Kapania, Uninor CEO Sigve Brekke have demanded a more level-playing field in this matter.

"Not taking strong and affirmative action at this critical juncture could result in even more opacity and an auction design that is flawed and discriminatory," the letter said.

CEOs of the four telecom operators said that 1 percent SUC is applicable if 4G is launched in 2300MHz spectrum band (held by RJIL).

If the same technology is deployed by an existing GSM or CDMA operator in spectrum band being put up for auction, then they are required to pay SUC between at rate of 6 to 8 percent, it said.

The communication added that government will lose more if spectrum remains unsold compared to Rs. 250 crores per annum that it estimates to lose by reducing SUC.

"As you may be aware, 167.50MHz of spectrum in 1800MHz (2G) band remained unsold in the November 2012 auctions. Even taking today's reserve prices... the loss to the government exchequer on account of this unsold spectrum is around Rs. 4,900 crores upfront and about Rs. 1,960 crores per year," the letter said.

The same letter has been sent to TRAI chairman also.

The Telecom Commission is meeting on December 31 to discuss SUC and its recommendation will be sent Empowered Group of Minister on telecom, headed by Finance Minister P Chidambaram.

It will be for the EGoM to move the Cabinet for a final decision on the SUC, sources said.