Tough times ahead for Airtel and Vodafone as Cabinet clears Rs 31,000 crore levy on extra spectrum

Telecom Lead India: The Cabinet has approved levy of about Rs 31,000 crore as one-time fee on spectrum held by telecom operators such as Airtel and Vodafone.

This is an attempt to create level playing field between old and new mobile operators.

Finance Minister P Chidambaram said the Cabinet has approved the recommendation of an Empowered Group of Ministers that GSM-based telecom operators be asked to pay for airwaves they hold beyond 4.4 Mega-Hertz at an auction-determined price, while CDMA carriers pay for holdings beyond 2.5 MHz, for the remaining validity of their permits.

GSM-operators holding more than 6.2 MHz of spectrum will pay a retroactive fee for the airwaves from July 2008.

Chidambaram said while the price discovered in the auction beginning November 12 will apply for the one-time fee to be charged from incumbent GSM operators, the Department of Telecom (DoT) will work out the basis for the same for CDMA carriers.

This is because there is no bidder for CDMA auction now and so there will be no auction determined price.

“Similar recommendations (of auction determined price being levied) were made for CDMA but there has been subsequent developments since the EGoM meeting that bidders who had evinced interest for CDMA auction have withdrawn from the auction. Therefore there is no auction now for the CDMA,” he said.

DoT has been requested to come back to the Cabinet regarding implementation of the decision regarding CDMA since both Tata Teleservices and Videocon Telecommunications exited from spectrum auction.

Videocon, Telenor, Airtel, Idea Cellular and Vodafone will be competing for GSM spectrum on November 12.
Chidambaram said licensees will be given an option to surrender spectrum beyond 4.4 MHz for GSM if they don’t want the one-time fee. Payments can be made in monthly installments at 9.75 percent interest rate.

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