Vodafone likely to be asked to pay another Rs 549 cr for using 3G spectrum in 11 circles

Additional penalty charged as fee for using 3G through ICR pacts

The department of telecommunications (DoT) is likely to ask Vodafone India to pay an additional penalty of Rs 549 crore for using third-generation (3G) spectrum in 11 service areas, which was allocated to another company, through intra-circle roaming (ICR) agreements.

In a recent audit, R B Sinha, director general of audit (post and telecommunications), has noted that since Vodafone Group has been earning revenue using the spectrum allotted through a bidding process to another operator, the company should be made liable to pay, as penalty, a proportionate amount of the bid amount paid by the successful bidder, for the period of their use of 3G spectrum.

This penalty, which works out to Rs 549 crore for the period between September 2010 and March 2013 (Rs 18.3 crore a month, as the total bid amount was Rs 4,391.7 crore for 11 service areas for 20 years), should be in addition to the Rs 550 crore already proposed by DoT for breach of licence conditions, according to Sinha’s audit note.

Under the licence conditions, operators need to pay a percentage of the adjusted gross revenue (AGR) as spectrum usage charges, it added.

Vodafone declined to comment on the issue.

The audit report further noted the short levy of spectrum usage charges due to application of lower rates on the 3G revenue earned by Vodafone Group in the 11 service areas, for the period from September 2010 to March 2013, worked out to Rs 152.4 crore and total short levy, including interest on short collection, worked out to Rs 187.4 crore. The short levy was worked out on the basis of spectrum usage charges applicable for use of 3G spectrum by successful bidder.

Meanwhile, Vodafone had, on July 2, written to DoT stating that imposing penalty for the 3G intra-circle roaming issue would undermine investors’ confidence. In reply to DoT’s showcause notice, Vodafone has written to DoT requesting it to “withdraw the showcause notice”.

Vodafone had received the notice on May 31. DoT had also sent notices to Bharti Airtel and Idea Cellular, terming the 3G intra-circle roaming pacts are a violation of licence norms.

The DoT notice said the agreement between the company with Bharti Airtel and Idea Cellular was in the nature of sub-leasing of 3G spectrum, a violation of licence conditions. All the companies have contested the matter in courts.

Terming DoT’s stand “arbitrary, inconsistent, unfair and unreasonable”, Vodafone said it would not only “give rise to serious disputes and challenges but will also irreparably impact all future auctions that may be conducted by the DoT as bidders would have no faith or rely on any statements made by the DoT.”