Vodafone faces Rs 549 crore additional penalty for using 3G spectrum of other telecoms

Telecom service provider (telecoms) Vodafone is facing Rs 549 crore additional penalty for using 3G spectrum of other mobile operators in 11 circles. This penalty is beyond DoT’s Rs 550 crore penalty on Vodafone.

The company faces the additional penalty for operating and generating revenue in 11 circles without a license after signing intra-circle roaming (ICR) agreements with another 3G operator.

The 3G roaming pact and controversial decisions from the telecom ministry affected the confidence of Indian telecom operators. However, telecoms including Vodafone are expanding their presence in India. ( Vodafone India betting big on 3G data for future growth )

Last week, COAI director general Rajan Mathews said spectrum sharing will pave for finding a solution to the 3G roaming issue. If spectrum can be shared among operators, there will be no need for entering into 3G roaming agreements. ( COAI chief Rajan Mathews says 4 decisions will pave way for telecoms revival )

But today’s media report suggests that Indian telecom minister Kapil Sibal may not allow spectrum sharing since it will negatively impact revenue generation from future spectrum selling.

In May 2013, Vodafone India MD and CEO Marten Pieters said the company would invest more in 3G if spectrum is available.

Additional penalties are a big concern for telecoms, according to COAI. Recently, Vodafone wrote to DoT stating that imposing penalty for the 3G intra-circle roaming issue would undermine investors’ confidence. Despite several suggestions from the telecom industry body and telecoms, government is finding more opportunities to generate funds.

Vodafone faces Rs 549 crore additional penalty for using 3G spectrum

For instance, the recent audit note by RB Sinha, director general of audit (post and telecommunications), said Vodafone India earned revenue using the 3G spectrum allotted through a bidding process to another operator. Since Vodafone generated income from 3G business, the company should pay penalty for using their 3G spectrum. The penalty should be proportionate to the 3G spectrum fee paid the other telecom operator.

This penalty will be around Rs 549 crore during September 2010 and March 2013 (Rs 18.30 crore per month, as the total bid amount was Rs 4391.69 crore for 11 service areas for a period of 20 years). This penalty will be in addition to Rs 550 crore already proposed by DoT for breach of licence conditions, Business Standard reported today.

As per the licence conditions, operators need to pay a percentage of the adjusted gross revenue (AGR) as spectrum usage charges.

The audit report says the short levy of spectrum usage charges due to application of lower rates on the 3G revenue earned by Vodafone Group in the 11 service areas during September 2010 to March 2013 worked out to Rs 152.4 crore and total short levy including interest on short collection worked out to Rs 187.39 crore. The short levy was worked out on the basis of spectrum usage charges applicable for use of 3G spectrum by successful bidder.

Besides Vodafone, telecoms Bharti Airtel and Idea Cellular are facing penalties.

Despite challenging times, Vodafone has slashed 3G tariffs recently. ( Vodafone India prices 500MB data at Rs 25 for 2G and Rs 49 for 3G )

editor@telecomlead.com