The Telegraph
Since 1st March, 1999
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Spectrum fee bombshell awaits telecom firms

New Delhi, Oct. 19: Cellular and new basic service operators could be slapped with a new tab for over Rs 19,000 crore.

That is the sum they owe the government in spectrum licence fee costs. Spectrum is the radio frequency that is leased out to telecom operators to provide their telephony services.

The new tab arises from an unpaid spectrum licence fee cost for the additional spectrum that has been allotted to them over and above what was legally contracted and mandated as per their licence agreements.

The meeting of group of ministers (GoM) to be held end of this month assumes significance as it is scheduled to announce a roadmap for allocation of future spectrum to private telecom operators.

Six major operators (see chart) have to pay the government a sum of Rs 17,553 crore while the other smaller operators have to pay about Rs 1,500 crore for the additional spectrum that has been allocated to them.

The spectrum licence fee is different from spectrum usage charge. Operators pay 2 per cent of their spectrum usage charge for 4.4 Mhz usage, 3 per cent for 6.2 Mhz and 4 per cent for 10Mhz. However, no spectrum licence fee has been charged from them yet.

The difference between the two costs is the same as the one between land fee and housing tax. Realtors pay the land fee to the government (which is a one-time cost that is ultimately passed on to the people who buy the flats built on the land) while the consumers pay a housing tax at regular intervals.

Under the licence agreements signed by cellular operators, they were entitled to get only a cumulative of 4.4 megahertz of spectrum and each of the six old basic fixed line operators were to get 8 + 8 Mhz spectrum. The licence agreements also stipulate that an additional licence fee should be charged for any additional spectrum.

It is not clear whether communications minister Arun Shourie will ask the operators to cough up the spectrum licence fee. Spectrum allocation is determined by the defence ministry because of security reasons.

The GoM members are likely to raise the issue about the unpaid tab when other members move a proposal to increase spectrum allocation for commercial use. At present, the government bears the spectrum licence cost. The GoM will have to decide whether it should not be passed on to the telecom operators.

The cellular operators have managed to get more than the assigned spectrum without paying any fee (for the additional spectrum) and the new basic operators offering limited mobile services have sought 2.5 + 2.5 Mhz spectrum to offer mobile services without paying the spectrum licence fee.

“The calculations that the operators should pay (Rs 19,053 crore) the government and which are paid by operators internationally too, are based on the per megahertz of spectrum allotted. Those cellular operators who are seeking additional spectrum and the new basic operators who are operating WiLL services should be asked to either return the spectrum or pay on a pro rata basis by December 30 of this year,” said a member of the Telecom Commission.

The department of telecommunications (DoT) had told the group on telecom and IT (which approved the limited mobility services) that if the spectrum licence fee was passed on to the operators, then telecom services will become expensive.

“This is a weird argument: it amounts to saying that the government should give out the land virtually free, otherwise the house built on the land will be expensive. These telecom operators are paying what is equivalent to a house tax and not the ground rent,” said a senior telecom counsel.

According to a senior official in the communications ministry: “The new limited mobile operators should also pay for the spectrum and it should be limited to 2.5+2.5 Mhz. They should also be asked to use only the V5.2 software (which confines calls to the short distance charging area) and restrain them from using mobile switching centres.”

“This will ensure a level playing field amongst the basic operators and cellular mobile operators. It will also help resolve the contention of TDSAT and cellular operators that spectrum is being given free of cost to the new basic service operators,” sources added.

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