Government lowers spectrum fee, telcos to save Rs.3,200 crore
In a step that may lead to lowered call and broadband charges, the government slashed spectrum usage charges (SUC) from 5% to 3%. The move is expected to bring a Rs.3,200 crore relief for mobile companies. The decision will act as a confidence booster before July's mega auctions when the government will auction over 2,000MHz of spectrum across 7 frequencies.
Telecom regulator TRAI suggested a sharp 60 per cent cut in the floor price of the phone spectrum fee for an upcoming auction. This would mean levying a 3% SUC for all auctioned spectrum. TRAI also recommended that telecom firms be allowed to trade spectrum they buy through auctions TRAI's recommendations came after the Department of Telecommunications(DoT) had sought its opinion on SUC pricing.
Spectrum Usage Charge is a fee charged annually as a percentage of the adjusted gross revenue that mobile corporations make from telecom services.
The issue of SUC reduction met with a lot of resistance from Mukesh Ambani's Reliance Jio Infocomm. Ambani's company which planned to offer telecom services was liable to pay only 1% on the broadband wireless access (which is one of the mainstays for its services). The company contended that TRAI's recommendation to reduce SUC to 3% would harm Reliance Jio's business critically.
The government after assessing the bearing on the exchequer, decided to fix SUC at 5% on the spectrum that was to be obtained in future. Companies previously holding the spectrum will be charged at a weighted average of old and new fee. The telcos had been paying 6-8% SUC previously, and the move came after 2 rounds of tepid response from telecos.
The Supreme Court hearing a PIL against the differential pricing of spectrum asked the government to explain why this was the case and 'fix-it'. This pertained to the 1% BWA charge paid by Reliance Jio and 5% SUC by other telcos. In India, differential SUC rates are levied for broadband wireless access (BWA) companies and telcos, even when the two are providing similar services.