EGoM may decide today on charging incumbent telcos

Varying views expected to be resolved when EGoM meets tomorrow under FM to take a decision on contentious issue of one-time charge on incumbent operators

In its last meeting on October 3, the empowered group of ministers (EGoM) on telecom had taken a favourable view of a DoT (department of telecom) proposal to charge for all GSM spectrum beyond 4.4 MHz and CDMA spectrum beyond 2.5 MHz. That, it contended, would be the most viable, tenable and sustainable compromise between the conflicting objectives of ensuring a level playing and honouring the sanctity of contracts.

However, it also acknowledged even that option would encounter legal challenges. But it said the government could prepare a robust legal defence.

The view is at variance with that of the Attorney General (AG) of India. The AG, who gave his opinion after the group meeting, answered in the negative to a query as to whether a one-time spectrum charge could be levied prospectively on all licencees.

Instead, it opined a one-time spectrum charge could be levied for spectrum allotted beyond 6.2 MHz retrospectively from July 2008 but not from the date of allocation of additional spectrum.

The varying views are expected to be resolved when the EGoM meets tomorrow under Finance Minister P Chidambaram to take a decision on the contentious issue of a one-time charge on incumbent operators. Acknowledging that the various options for the one-time payment incumbent operators would have to make had their pros and cons and likely legal challenges, the EGoM had agreed to wait for the AG’s opinion before taking the final call.

The DoT had proposed three options: a one-time payment for more than zero MHz, a charge above 4.4 MHz and a charge above 6.2 MHz prospectively.

In its discussions during the last meeting, the EGoM said charging for spectrum prospectively from 6.2 MHz would implicitly endorse that the government had an obligation under the licence to give up to 6.2 MHz of spectrum, which could lead to claims from operators assigned only 4.4 MHz.

That would also not ensure a level playing field between the old and the new operators, as the new players would be paying for the entire spectrum at the auction price. The option would, in fact, lead to the widest gap between existing players and new operators.

The EGoM has, instead, been positive on the option of imposing a one-time charge beyond 4.4 MHz. It has argued the option would insulate the government from claims by operators that received spectrum only up to 4.4 MHz for balance spectrum without further payment.

In the discussions, the EGoM has contended that even in this case there might be some legal challenges, with operators that have received only 4.4 MHz possibly laying claim over the remaining spectrum without payment. It has said the government position that the “contract” would best apply to the quantum of spectrum and not its price and that in any case allotment up to 4.4 MHz was not being charged for initially could help the government put up a robust legal defence against any claims.