Breather for telcos: Retrospective fee based on 2001 auction price

In an earlier version of this article, the headline had erroneously mentioned 2011 instead of 2001; it has been corrected

In a relief to the incumbent telecom operators, who have more than 6.2 MHz spectrum, the department of telecom (DoT) on Friday clarified the retrospective fee on spectrum beyond 6.2 MHz would be calculated based on the 2001 auction price, indexed to the prime lending rate (PLR) of a state-owned bank.

This would give the telecom operators a saving of Rs 5,000-6,000 crore, as the fee would not be calculated on the basis of a new auction price discounted on the PLR of a state-owned bank.

DoT Secretary R Chandrashekhar on Friday said the companies would need to pay about Rs 4,000 crore for excess spectrum beyond 6.2 MHz, as the retrospective charge to be levied for four years between 2008 and 2012.

Of this, about Rs 1,600 crore would come from state-owned telecom service providers — Bharat Sanchar Nigam Ltd (BSNL) and MTNL.

This would increase the burden of the state-owned telecom operators — BSNL and MTNL to about Rs 11,000 crore which they need to pay as the one-time spectrum fee. They have already knocked the government’s door asking the government to bear the additional cost of spectrum. State-owned companies have shown poor financial situation as a reason for bailout by the government.

The decision of the empowered group of ministers (EGoM) on telecom, if gets a go ahead from the Cabinet, will add to the burden of operators — including Bharti Airtel, Vodafone, Idea Cellular, Reliance Communications, Tata Teleservices, BSNL and MTNL, who would have had to fork out Rs 27,000 crore as one-time fee based on the EGoM’s previous decision.

The retrospective charge will apply from July 2008 to December 2012. So, incumbent telecom operators will now pay Rs 31,000 crore, of which Rs 11,000 crore will come from the state-owned BSNL and MTNL, as a result of the decision taken by the EGoM on telecom on Thursday, to tweak the structure under which operators must pay prospectively for spectrum beyond 4.4 MHz in GSM and 2.5 MHz in CDMA. However, this would be applicable if the Cabinet gives a go ahead.

The EGoM has also deferred its decision a decision on the contentious issue of spectrum refarming in the 900-MHz band.

“The final decision on refarming will be taken before November 12, when the auction would start,” said Chandrashekhar.

On Thursday, Communications minister Kapil Sibal has said that the decision was expected to be taken a week before the auction starts.