One-time fee for all telcos holding more than 4.4 MHz of spectrum: Top 10 developments

NDTV Profit Desk

09 Oct 2012, 12:55 AM IST

The Empowered Group of Ministers, headed by Finance Minister P. Chidambaram, decided on 4.4 MHz, and not 6.2 MHz, as the threshold for the levy of a one-time fee as the latter would have meant further entitlement of spectrum to the players which do not have up to 6.2 MHz bandwidth. There are 97 applications still pending for increasing spectrum from 4.4 MHz to 6.2 MHz. Fixing 6.2 MHz would have meant giving 1.8 MHz free to these applicants. Code division multiple access (CDMA) service providers will have to pay a one-time fee beyond 2.5 MHz.
The EGoM recommendations effectively ignore the advice of Attorney General G.E. Vahanvati, who had suggested that a one-time fee be levied retrospectively from July 2008 on spectrum allotted to telecom companies beyond 6.2 MHz. The recommendations also mean easy payment and refund terms. The one-time fee will be applicable from the date of the Cabinet’s decision; operators can pay the fee in annual instalments, which will be calculated based on the number of years of licence. Non-charge sheeted telecos can also seek a refund. Existing telcos can extend their spectrum terms for 20 years by paying for all the bandwidth they hold. However, Law Minister Salman Khurshid said a final decision on the subject will be taken in consultation with Attorney General G. E. Vahanvati. He said the recommendations made by him have not been rejected.
Today’s recommendations are likely to be challenged in court by telcos. An amendment to the licence terms and conditions will be needed. These licences allow for amendment only if the government can invoke the need to protect national security or public interest. The Attorney General had earlier said that while a one-time fee will allow for a level playing field, the issue can in no way be seen as one that threatens national or public interest.
Existing telecom service providers have said they will decide on participating in the spectrum auction in November 2012 based on the decision taken by the government on the one-time spectrum fee. The last date for submitting applications for participating in the auction is October 19.
Shares in mobile carriers outperformed broader markets to close mostly higher today. Tata Teleservices closed with 4.5 per cent gains while Idea Cellular advanced 3.6 per cent. Anil Ambani-promoted Reliance Communications rose 2.2 per cent while Bharti Airtel shares closed 1.6 per cent higher. In contrast, the BSE Sensex and the broader NSE Nifty declined 1.2 per cent each.
The auction was ordered in February this year by the Supreme Court, which cancelled all the licences issued by the then telecom minister A Raja in 2008. Mr Raja has been accused of giving away priceless spectrum at throwaway prices as he allegedly handed licences on a first-come-first-served basis to several ineligible companies. The Supreme Court canceled the licences, saying natural resource should be auctioned and had set a deadline of August this year for the reallocation. Mr Raja spent over a year in jail and is now out on bail. The 2G spectrum auction is now scheduled to begin on 12 November, 2012; this after the Supreme Court extended the auction deadline to January 11, 2013.
The Department of Telecommunication (DoT) had suggested four options to the Cabinet on spectrum fee—no charge, a one-time fee on all airwaves held by the telecom companies, a fee on airwaves held beyond the start-up spectrum of 4.4 MHz, or a fee on airwaves held beyond the contracted spectrum of 6.2 MHz. DoT said if the government charged operators for all spectrum bandwidth it would earn the government Rs. 72,792 crore, charging for spectrum beyond 4.4 MHz would add Rs. 27,517 crore to the kitty and this is what the EGoM has recommended today. Charging for spectrum beyond 6.2 MHz, would fetch Rs. 22,640 crore.
While announcing the auction guidelines last month, DoT said telecom companies whose licences were quashed by the Supreme Court would be required to pay a minimum earnest money of Rs. 1,332 crore to bid for pan-India spectrum. The guidelines also stated that telecom companies whose licences had been cancelled would be treated as new players in the bidding.
In July, the Cabinet had referred the matter to the group of ministers. Later that month, the EGoM deferred a decision on the matter till the Supreme Court gave its opinion on a Presidential Reference. The top court did so in September and the government is now free to take a decision in this regard.
The EGoM last met on October 3, but was unable to decide on the one-time spectrum fee issue as it had yet to receive the Attorney General’s opinion on the matter. The Attorney General submitted his note on Friday, October 5.