Ministers panel sets 5 pc usage charge for new spectrum

A ministerial panel today fixed the spectrum usage charge (SUC) for new airwaves at 5 per cent of the revenue of telecom operators in a bid to boost sales in the auction starting February 3.
"The SUC shall be at rate of 5 per cent on new spectrum. The big players will benefit to that extent, small players will also benefit," Telecom Minister Kapil Sibal told reporters after the panel meeting.
Vodafone Resident Director and Assocham's National Telecom Council Chairman TV Ramachandran expressed disappointment at the decision, saying the rate is higher than the level recommended by the regulator.
Sibal said the government expects the auction to be a huge success after this decision as it lowers the financial burden of big telecom operators such as Bharti Airtel and Vodafone and does not adversely impact new operators. The SUC currently ranges from 3 to 8 per cent for mobile operators.

"With greater investment in the sector and successful auctions, the consumer will benefit. Successful auction means greater investment in the sector, results in efficiency of service and lowering of tariffs," Sibal said.
The Empowered Group of Ministers (EGoM) headed by Finance Minister P Chidambaram decided that existing telecom operators will have to pay the weighted average of their existing SUC and 5 per cent for new spectrum acquired.

The SUC is levied annually as a percentage of revenue earned from telecom services. For companies that hold broadband wireless access (BWA) spectrum, such as Reliance Jio Infocomm Ltd and Tikona, the fee is 1 per cent.

The EGoM did not approve the Telecom Regulatory Authority of India's suggestion for a uniform SUC of 3 to 5 per cent across sectors, which would have increased the charge for BWA holders.
"We have not made any amendment in any contractual obligations. BWA players will continue to pay 1 per cent SUC and if they acquire new spectrum, they will have to pay 5 per cent," Sibal said.
Telecom Secretary MF Farooqui said the decision will have no adverse impact on the government's revenue.
"The current levels of revenue will be protected. Operators are having spectrum at different values. When we take weighted average, it stands at 4.8 per cent. Now it will be fixed 5 per cent for new spectrum," Farooqui said.

He said BWA holders will have to report separate revenue flows from existing spectrum and newly acquired airwaves.
"Industry is disappointed that the SUC has been decided as high as 5 per cent for auctioned spectrum whereas TRAI had recommended 3 per cent. This will further add financial burden on the industry," Assocham's Ramachandran said.
The SUC should have been set at 1 per cent to ensure a level playing field with holders of BWA spectrum, he said.