While telecom companies have been expressing concern over the Telecom Regulatory Authority of India's recommendations in fixing reserve price for over 2000MHz -- to be auctioned in the coming months -- the Department of Telecommunications has decided to slash spectrum usage charges from 5 percent to 3 percent of gross revenues on spectrum acquired in the ensuing auction.
This would entail savings of about $480 million (3200 crore rupees) to the cash-strapped mobile operators. The decision, which will be approved by the Indian Cabinet in the coming days, is also likely to benefit consumers as the phone charges would come down. The decision is a follow up of TRAI's suggestion to collect a uniform charge of 3 percent across all frequencies.
TRAI has recommended auction of spectrum across seven bands for this summer, including the much sought after 700MHz, which is expected to fetch over $85 billion (5.34 lakh crore rupees) to the government.
The telecom companies, which are facing an acute financial crunch, have appealed to the government to defer the auctions for at least two years or reduce the prices to enable them participate in the bids.
While some of service providers like Airtel have started acquiring spectrum from small companies by spending more than $1 billion so far as part of rolling out 4G services across the country, others like Reliance Jio have entered into an understanding with other firms in sharing the spectrum.
The government has not taken any decision on the regulator's recommendation but, in the backdrop of these developments, is looking at ways and means to make the companies rethink on participation in the next round of spectrum.
Terming the decision to reduce spectrum usage charges as a "first step in the right direction," the companies are demanding the government reduce the spectrum usage charges further.
"The government should bring down these charges to meet the administrative costs as the companies have already paid high amounts during earlier rounds of auction of spectrum," Ashok Sud, secretary general of the Association of Unified Telecom Service Providers of India (AUTSPI), said.
Speaking to ZDNet, Sud said that further reduction will also help in more investments by the mobile service operators which in turn would help them to improve services to its consumers.
According to a report in Business Standard, the Cellular Operators Association of India (COAI) has urged the government to impose the 3 percent spectrum usage charge in a uniform manner and bring it down to 1 percent in a phased manner.
In a letter to TRAI and the Department of Telecommunications (DoT), the association pointed out that there were different charges for spectrum assigned at different points of time. "The multiplicity of these rates leads to ambiguity while entering into transactions such as mergers and acquisitions (M&As), spectrum trading, and sharing, and a uniform rate will simplify calculations and remove arbitrage," the association said.
Indian Minister for Communication and Information Technology Ravi Shankar Prasad said in December last year that the telcos have to pay $8 billion in arrears to the government, half of it in the form of spectrum usage charges, but the service providers have challenged the claims in various courts where the cases are being heard.
"The cases are being defended vigorously in various courts and in the Supreme Court and action will be taken depending upon the judgments," he told the Indian Parliament.