India finalizes spectrum usage charge

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India Government has approved Spectrum Usage Charge (SUC) for the spectrum in various bands held by telecom network operators or to be acquired in spectrum auction in 2016.

Prime Minister Narendra Modi chaired the meeting to finalize the much debated spectrum usage charge. The final decision on the rates of Spectrum Usage Charge (SUC) for telecom spectrum bands will also pave for the spectrum auction in India. Spectrum auction is expected to kick off in September.

The SUC rate will be 3 percent of Adjusted Gross Revenue (AGR) on spectrum acquired in forthcoming auction in 700, 800, 900, 1800, 2100, 2300 and 2500 MHz band.

The weighted average of SUC rates across all spectrum assigned to an operator — on assigned administratively or through auction or through trading — in all spectrum bands including BWA spectrum obtained in 2010 auction shall be applied for charging SUC subject to a minimum of 3 percent of AGR.

The Government said the weighted average is to be derived by sum of product of spectrum holdings and applicable SUC rate divided by total spectrum holding. The Weighted Average Rate shall be determined operator wise for each service area.

The amount of SUC payable by the telecom operators during 2015-16 at weighted average derived after taking into consideration the spectrum acquired in the coming auction and excluding the spectrum in 2300 MHz / 2500 MHz band acquired / allocated prior to 2015-16, shall be treated as the floor amount of the SUC to be paid by the mobile operators. In case, there is a reduction in AGR of the service provider, the floor amount of SUC shall be reduced proportionately.

The India government believes that the new SUC will facilitate to move to a simple, transparent and flat ad-valorem SUC regime in accordance with the law and avoid creative accounting to bypass the revenues.

SUC impact

IANS earlier reported that Bharti Airtel, India’s largest telecom operator promoted by Sunil Mittal, will need to pay 3.8 percent as minimum SUC charges from about 4.9 percent earlier. Reliance Jio Infocomm, the 4G venture by businessman Mukesh Ambani, will pay about 3.05 percent from the previous weighted-average formula of 2.88 percent.

The government gets around Rs 7,000 crore every year from SUC.

In July, the Telecom Commission decided to set a minimum 3 per cent spectrum usage charges (SUC) to create a level playing field among operators.

Cellular Operators’ Association of India (COAI) head Rajan S Mathews was not happy with the decision of the Telecom Commission. COAI felt that the methodology to calculate SUC does not help the telecom industry.

The government is expecting to mobilize around Rs 5.66 lakh crore from the upcoming telecom airwaves auction in September.

The Cabinet last month had approved the auction of over 2,300 MHz of airwaves in seven bands — 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz. The previous round had seen 470.75 MHz on the block.