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EGoM to decide on spectrum fees, telecom M&A rule on Monday

EGoM to decide on spectrum fees, telecom M&A rule on Monday

By Press Trust of India | Updated: 27 January 2014 10:16 IST

The Empowered Group of Ministers (EGoM) on telecom, headed by finance minister P Chidambaram, is likely to take a final call on Monday on the contentious issue of spectrum fee and long-awaited mergers and acquisitions norms.

"EGoM will meet on Monday. Hopefully a final decision should be taken on spectrum usage charge. Merger and acquisition guidelines are almost ready but were not released pending a legal opinion. A final decision is also expected on the same," an official source told PTI.

Meanwhile, the Department of Telecom (DoT) has extended the last date to withdraw applications for the upcoming spectrum auction to January 28 from January 27 earlier.

The inter-ministerial panel Telecom Commission (TC) on Saturday recommended three options for levying annual spectrum usage charge (SUC) on telecom operators.

GSM firms such as Bharti Airtel, Vodafone and Idea Cellular have locked horns with Mukesh Ambani-led Reliance Jio Infocomm following the Telecom Regulatory Authority of India's (TRAI) recommendation of a uniform SUC.

The charge is levied annually by the government as a percentage of revenue earned from telecom services.

It currently ranges from 3 to 8 percent for mobile operators, while for firms with Broadband Wireless Access (BWA) spectrum such as Reliance Jio Infocomm Ltd and Tikona, the fee is 1 percent.

Sources said the panel is learnt to have worked out three options for the SUC on BWA spectrum. One of the options is levying the weighted average of 1 percent on BWA and 3 percent when combined with other sets of airwaves.

However, the Attorney General is understood to have advised against revising the BWA spectrum levy and has suggested that the government continue with the current rate of 1 percent and not club revenue generated from any other set of airwaves.

Eight telecom service providers, including 7 GSM operators, have applied to participate in the spectrum auction scheduled to start on February 3.

There were no bidders in the March auctions and only five in the November 2012 auctions, indicating huge interest in the forthcoming offer of airwaves.

The applicants include Reliance Jio Infocomm, Vodafone, Airtel, Aircel, Tata Teleservices, Idea Cellular, Telewings (Uninor) and Reliance Communications.

The matter is crucial for the spectrum auction scheduled to start on February 3, from which the government expects to raise at least Rs. 11,300 crores to curb the fiscal deficit.

The EGoM will also consider TRAI's recommendation for a uniform spectrum usage charge (SUC) of 3 to 5 percent from April 1 across the sector.

Sources said the Commission suggested levying an SUC equivalent to the weighted average of 3 per cent for spectrum won in the upcoming auction and the existing slab rate.

The second option is the weighted average of 5 per cent for the airwaves to be auctioned and the current slab rate.

The third recommendation is to continue with the existing regime, the sources said.

Besides this, the EGoM approved the M&A guidelines but it will need cabinet approval if legal opinion has finds that the consolidation activity amounts to sale of equity.

As per the guidelines approved by EGoM, market share of a merged entity should not exceed 50 percent of the subscriber base and companies who have procured spectrum through auction will not have to pay additional money to government for airwaves.

However, companies who were allocated spectrum at old rate of Rs. 1,658 crores will need to difference between market and old rate to government when they participate in consolidation activity.

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