Tuesday, November 11, 2008

Existing telecom operators may have to pay more for 3G

Existing telecom operators may have to pay more than the new players eyeing the 3G space, in the form of annual charge for the 3G spectrum. A committee chaired by Department of Telecommunications (DoT) Joint Secretary J S Deepak has recommended that an operator having 2G spectrum and 5 Mhz of 3G spectrum should pay an incremental 1 per cent more than the applicable slab rate for 2G spectrum.
The committee, which was set up to suggest annual spectrum charges for 3G, has recommended that due to the efficiency in capital expenditure and synergy in operations, operators having 2G spectrum and acquiring 5 Mhz of 3G spectrum should be charged at a higher rate.

GSM 2G operators get 4.4 MHz and CDMA players get 2.5 Mhz of start-up spectrum with their telecom licences, on which they have to pay an annual fees of 2 per cent of their aggregate gross revenue (AGR). For spectrum up to 6.2 Mhz, the operators have to pay 3 per cent of their AGR, while for spectrum up to 8 Mhz they have to pay 4 per cent of their revenues and so forth.

Therefore, for a stand-alone 3G operator, the rate will be equivalent to the 5 Mhz slab rate of 2G spectrum or 3 per cent of the AGR. But operators having both 2G and 3G spectrum will have to pay one per cent over and above the present 2G slab rate.

Recommendations of the committee will be discussed in the Telecom Commission meeting to be held tomorrow. The committee has, however, ruled out the possibility of segregation of 2G and 3G revenues, as proposed by GSM operators.

The committee has also taken into consideration the recent proposal of Union Minister for Communications and IT A Raja, which came after his meeting with Finance Minister P Chidambaram and Prime Minister Manmonhan Singh, to raise the existing annual charges for 2G spectrum.

During the meeting of two ministers, it was also decided that spectrum usage charges up to 8 MHz would be increased by 1 per cent of the AGR. Above 8 MHz, the charges would be increased by 2 per cent of AGR for each of the respective slabs. The proposal will be discussed by the Telecom Commission in its meeting. If approved, it will be effective from January 1, 2009.

In case these revised rates are levied, the committee recommends that the annual spectrum charges for an operator with both 2G and 3G spectrum be the same as the operator with only 3G spectrum. The one-year moratorium given to the operators with only 3G spectrum will not be applicable to operators with 2G and 3G spectrum.

The Telecom Commission will also deliberate on the contentious issue of the quantum of the one-time charge for spectrum above 6.2 MHz, in addition to the licence fees. The committee has proposed that the Spectrum Enhancement Charge would be computed on the basis of the entry fee for the service area divided by 6.2. The same would be updated on the basis of the prime lending rate of the State Bank of India. Raja had earlier indicated that this price could be set at Rs 4,000 crore.

If the move is approved by the commission, operators like Bharti Airtel, Vodafone and Idea Cellular, who posses spectrum above 6.2 Mhz, will have to submit the fees by March 31, 2009. In future, operators seeking spectrum beyond 6.2 Mhz will have to pay the charge at the time of allotment.

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