No money movement reduction if 3% ground charge just isn’t eliminated: Telcos cry foul as spectrum cost ground charge stays

Telecom operators have advised the division of telecommunications (DoT) that abolishing spectrum utilization cost (SUC) within the upcoming 5G auctions and past will probably be meaningless if the federal government doesn’t take away the ground charge of three% on such funds which is relevant on present holdings. The ground was fastened in 2016 to guard authorities revenues as SUC at the moment was lowered as an incentive to take part in auctions.

The operators advised DoT officers at a pre-bid convention on Monday that the discover inviting functions (NIA) for the auctions doesn’t point out the elimination of the ground charge of three% SUC levied on their adjusted gross income.

The elimination of the ground charge is required to provide impact to the telecom reduction bundle introduced by the federal government in September 2021, the place other than offering a four-year moratorium to operators on their AGR and spectrum dues, the federal government had additionally stated that there can be no SUC on airwaves acquired in future auctions.

If the ground just isn’t eliminated, and operators are requested to pay nil SUC on spectrum purchased in 5G auctions, they must segregate revenues from totally different spectrum bands, which is technically not doable. Previously, a DoT committee has stated that the identical spectrum bands are used to offer totally different providers, so segregation just isn’t doable and, if allowed, there’s a excessive probability of arbitrage with operators displaying revenues in bands the place the SUC is decrease or zero.

As an example, 4G spectrum at the moment with operators will probably be used for 5G providers as soon as they purchase extra spectrum within the latter band within the upcoming auctions. “How is it doable then to establish which spectrum, acquired when, is getting used for offering which providers,” business executives requested.

Although the telecom bundle talks of scrapping SUC solely on spectrum acquired in future auctions like that of 5G, if the ground is abolished, as and when operators purchase extra spectrum in future auctions, their SUC will turn into zero on your entire holding.

At present, there’s a fancy weighted common formulation to calculate the SUC of operators who’ve a mixture of administratively allotted spectrum and people acquired via auctions. Reliance Jio, which has its whole spectrum from auctions, pays a flat 3% SUC on its whole spectrum holding, however operators like Bharti Airtel and Vodafone Concept pay between 4.5-5% as they’ve a mixture of two.

The weighted common formulation was designed such that with time as operators purchase extra spectrum in auctions, their SUC would come down from say 4.5-5% to three%. It might thus have gone even beneath 3% over a time frame because the quantum of auctioned spectrum grew, so to guard its income, the federal government fastened a ground of three% in 2016.

“The weighted common of SUC charges throughout all spectrum assigned to an operator (whether or not assigned administratively or via auctions or via buying and selling) in all entry spectrum bands, together with broadband wi-fi entry spectrum in 2300 MHz/2500 MHz band acquired within the 2010 public sale, shall be utilized for charging SUC topic to a minimal of three% of AGR excluding revenues from wireline providers,” reads the DoT’s notification on the topic.

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