Reduction In Spectrum Usage Charges Boosts Telecom Stocks

Telecom stocks such as Idea Cellular and Bharti Airtel outperformed the broader markets on Monday following a Press Trust of India report, which claimed that the government has cut spectrum usage charges from 5 per cent to 3 per cent.

Telecom companies have to pay two types of charges - a one-time price for bagging the spectrum rights and a recurrent spectrum usage charge, which was fixed at 5 per cent of adjusted gross revenues of telecom companies. 

The 40 per cent reduction in spectrum usage charges (from 5 per cent to 3 per cent now) could lead to savings of around Rs 3,000 crore for telecom companies, analysts said.

Analysts expect telecom companies to pass the benefits of lower spectrum charges to consumers, so mobile and data tariffs may fall in the coming days.

Sanjay Kapoor, former CEO of Bharti Airtel, told NDTV Profit that operators might use the savings from lower spectrum usage charge to improve their networks and reduce their debt than pass on the full savings to consumers in terms of lower tariffs. 

Idea Cellular shares ended nearly 6 per cent higher while Bharti Airtel gained 3.7 per cent  and Reliance Communication 2 per cent as compared to a 0.50 per cent gain in Sensex.