Spectrum auction: GSM firms press flat usage charge

Heads of 4 top firms say decision prior to bidding a must, if 2012 story not to be repeated; send joint letter on Trai proposal

Top executives of Bharti Airtel, Vodafone India, Idea Cellular and Uninor want a flat spectrum usage charge (SUC) before the next auction from January 23.

They’ve jointly written to the Prime Minister’s Office, Finance Minister P Chidambaram and Telecommunications Minister Kapil Sibal.

The Cellular Operators Association of India (COAI), which lobbies for GSM operators, has given its views earlier, favouring the uniform SUC the Telecom Regulatory Authority of India (Trai) had recommended. This is, however, the first time the four top executives — Gopal Vittal (chief executive of Bharti Airtel’s India operations), Marten Pieters (CEO of Vodafone), Himanshu Kapania (managing director of Idea Cellular) and Sigve Brekke (acting CEO of Uninor) have written a joint letter.

Copies have also been sent to all members of the Empowered Group of Ministers (EGoM) on telecom, Trai chairman Rahul Khullar and M F Farooqui, chairman of the Telecom Commission and secretary of the department of telecommunications (DoT).

These executives say if the government found it not possible to do this immediately, it should at least apply a uniform SUC to all technologies. For instance, all long-term evolution (LTE) technology deployment across any spectrum band should attract the same SUC of one per cent.

Earlier, Trai recommended the government have a uniform SUC at three per cent, which an internal committee of the DoT opposed. Cellular operators currently pay between one and eight per cent of their revenue as SUC, depending on their spectrum holding. Reliance Jio, holding broadband wireless access (BWA) spectrum, has repeatedly deliberated against the uniform SUC at three per cent, as it would increase SUC for BWA spectrum holders who now pay only one  per cent of revenue.

The executives’ letter states a decision on the SUC before the coming auction is important as the rate will have to be factored into the bids to be made by operators. “We believe policy makers should disentangle this web of opacity with clarity, speed and courage. Exercising this right choice will restore investor confidence, have a far-reaching impact on other sectors of the economy and result in a vibrant auction. Not taking strong and affirmative action at this critical juncture could result in even more opacity and an auction design that is flawed and discriminatory,” the letter said.

If not decided before the auction, the operators might not bid aggressively. “The loss due to spectrum remaining unsold is even higher; 167.50 MHz of spectrum in the 1800 MHz band remained unsold in the November 2012 auctions. Even taking today’s reserve prices...the loss to the government on account of this unsold spectrum is around Rs 4,900 crore upfront and about Rs 1,960 crore a year, far higher than the annual loss of Rs 250 crore on account of the flat SUC estimated by the department,” the letter says.

Earlier, Vodafone India, the country’s second largest mobile carrier, has said the slab-based spectrum usage charges may result in “stifle participation” in the coming auction.

Meanwhile, the Union cabinet has asked DoT to finalise the revised structure of the SUC before it conducts the next round of auction in January.

Earlier, the Telecom Commission had stated it would take a decision on the proposed uniform SUC after consulting with the finance ministry. The government has said it would follow the existing rules of SUC for the upcoming auction, unless it manages to take a final decision on the issue before auction.