Telecom firms including Bharti, Vodafone and Idea have claimed the upcoming auctions for airwaves may not get strong bids if the government does not announce a flat spectrum usage charge regime beforehand. They made this pitch at the pre-bid conference organised by the department of telecom (DoT) on Friday.
Rajan Mathews, director general of the industry association comprising the GSM players said, "Failure of DoT to clarify if they will be able to take a decision on the (issue) will be near fatal to the success of the upcoming auctions."
Currently, operators pay spectrum charges at different rates depending on their licence conditions. While Reliance Jio, which won the licence for offering broadband services in 3G spectrum, pays a 1 per cent fee, others holding older spectrum licences pay up to 6 per cent. The Telecom Regulatory Authority of India has recommended a flat 3 per cent rate. But the telecom department has opposed it saying that it will lose about Rs 4,000 crore in the next five years if it is implemented.
But analysts like Mohammad Chowdhury, leader (telecom) at PwC have said the higher charges might encourage far fewer bids in the 1800 Mhz slot. The government plans auction for spectrum in the 900 and 1800 Mhz. Since the latter is to be used as essentially a parking slot when the firms upgrade their 900 band for deploying 3G, the cost seems excessive. Rajan explained that in 900 mhz band an operator, who currently holds 4.4 MHz of spectrum, and acquires 5 MHz of additional spectrum and deploys it will see their charges jump from a 3 per cent to 6. This brings down their profit after tax by more than 6 per cent.
For the government the success of the auction is critical to shore up its fisc in FY14. While conservative estimates have put the receipts at about Rs 12,000 crore with the incentives placed right it could go up to Rs 40,000 crore.
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