Pay in full for 2G spectrum to adjust earlier entry fee: Govt to telcos

The Department of Telecommunications (DoT) is planning to permit adjustment of entry fee paid by telcos whose licences were cancelled by the Supreme Court order, only if they pay the entire amount for the 2G spectrum  that they have won upfront in the recently concluded auction and not take the deferred payment scheme.

The successful telcos have to make the payment by December 1.

The move will impact the plans of Videocon Telecommunications one of the five succesful bidders in the recently concluded auction of 1800 Mhz which wants to go go for a deferred payment scheme. The company which had lost its pan-India licence as a result of the Supreme Court order won spectrum in six circles for Rs 2,221.44 crore.

However, the company had written to the government in the third week of November asking for adjustment of the 33% of the successful bid amount (as permitted under the deferred payment scheme) with the set off amount of the entry fee which they had paid for the cancelled licences. If this was allowed, Videocon would not have had to fork out any money for the auctioned spectrum in the next seven years.

The government had given two options for payment to the winning bidders-one that they could pay the entire amount upfront, or pay under a deferred scheme. Under that scheme, operators had to pay 33% upfront, then get a two year morotorium and pay the balance in ten equal instalments but with an interest of 9.75% per annum.

Videocon, which has won spectrum in six telecom circles and has desired to pay the final bid amount in instalments, has written to the DoT, in the third week of November, asking for adjustments of the successful bid amount for the initial years with the entry fee.

In its communication to DoT, Videocon had argued that it is eligible for set-off of Rs 1,500.82 crore entry fee paid towards the quashed licences. As a result of the deferred payment scheme being offered, it would need to pay Rs 733.08 crore or 33% of the total bid amount in the first year. After adjustments (with the entry fee it paid for the quahed licence), there would be Rs 767.74 crore left with the DoT which it said should considered as pre-payment for the future instalments which it had to pay. As per Videocon calculations, the company based on their scheme would not have to pay a single paisa before 2019.

When contacted, Videocon Group Chairman VN Dhoot did not want to comment on the issue.

DoT said Idea Cellular, which has won spectrum in seven circles in the last auction of 1,800 MHz spectrum band for Rs 2,030.11 crore. However, it has opted for full adjustment of the entire entry fee towards the upfront payment.

The government had managed to close the auction with just Rs 9,407 crore due to lukewarm response in the last auction. The auction rules allow operators to pay 33% of the fee upfront and then a moratorium of two years. The balance can be paid in 10 annual instalments from the third year.

Telenor has won spectrum in six circles for Rs 4,018 crore and Vodafone would need to pay Rs 1,128 crore for spectrum. Airtel won only one circle (Assam) for Rs 8.67 crore.