Trai for 2% of highest 3G spectrum bid amount as admin fee

Adding to the apprehensions of the potential bidders for third generation (3G) spectrum in India, the Telecom Regulatory Authority of India (Trai) today recommended a levy of an additional 2 per cent on the highest bid amount as annual administrative charge. This is over and above what an operator has to pay as spectrum usage charges, which are calculated as a certain percentage of the total revenue earned by an operator.

Under the existing norms, successful bidders will have to shell out 3 to 8 per cent of their aggregate gross revenue (AGR) as spectrum usage charges, which vary according to the amount of spectrum used by an operator.

Standalone 3G operators who do not have 2G spectrum will have to pay an annual spectrum charge of 3 per cent of their annual AGR, which is equivalent to the lowest slab of incumbent mobile operator offering 2G services.

However Trai has provided the players a one-year moratorium from the date of allocation of spectrum for payment of administrative charge, due to the time required by the operators to roll out their services after the allocation of spectrum.

The latest development will, however, prove to be a deterrent for the potential bidders. Cellular Operators Association of India (COAI) director-general TV Ramachandran said, “This is a huge disappointment. It will have a direct impact on the operators who are looking to bid for 3G spectrum. The operators will take this extra charge into account when they bid, which will lead to a decline in the auction sales proceed. Therefore, the finance ministry will have to take a serious look at this issue.”

Further, the regulator has recommended that to maximise the number of 3G operators in the country, all available spectrum in 2.1GHz, including anticipated availability within the next one year, should be auctioned.

The Department of Telecommunications (DoT), however, has been looking at auctioning a maximum of five operators for 3G though there are many circles in which spectrum for more than five operators is available.

Communication Minister A Raja has publicly stated earlier that his ministry might look at auctioning anywhere between 5 and 10 operators for 3G. Even the finance ministry has been pushing for a one-time auction of 3G spectrum based on whatever spectrum is potentially available.

The auction for 3G spectrum is expected to start in the beginning of February. The information memorandum that will detail the 3G auction process was expected to come out on December 8, but given the recent recommendations by Trai and the final approval required by the DoT on the issue, the process could b delayed.