Several operators are likely to benefit as the Department of Telecommunications (DoT) is planning to re-calculate one-time spectrum usage charges (SUC) estimated at Rs 231.97 billion.

DoT’s move to calculate SUC afresh on basis of market price discovered in the spectrum auction concluded in February 2014 is likely to benefit operators including Bharat Sanchar Nigam Limited (BSNL), Mahanagar Telephone Nigam Limited (MTNL), Bharti Airtel, Vodafone India, Idea Cellular, Aircel and Reliance Communications.

Following DoT’s move to recalculate SUC, there will be a revision in rates in four circles  - Delhi, Mumbai, Karnataka and Rajasthan for spectrum in the 1800 MHz band and in three metros including Delhi, Mumbai and Kolkata for spectrum in the 900 MHz band. However, SUC will remain unchanged in other circles.

Earlier, in 2008, operators were awarded 4.4 MHz of spectrum along with license for Rs 16.58 billion for pan-India operations. At the same time, majority of the operators were allocated additional spectrum without any upfront charges. However, in 2012, the government decided that operators should pay for holding spectrum above 6.2 MHz retrospectively, from July 2008 to January 1, 2013 based on market determined price discovered in auction.

Subsequently, DoT raised a total demand of Rs 231.97 billion from operators who were issued licenses in 2008.  The amount was arrived at on the basis of reserve price fixed for 2G spectrum auction in November, 2012. As per DoT’s calculation, BSNL had to pay about Rs 69.12 billion, Bharti Airtel Rs 52.01 billion, Vodafone India Rs 35.99 billion, MTNL Rs 32.05 billion, Idea Cellular Rs 21.13 billion, Aircel Rs 13.65 billion, Loop Mobile Rs 6.06 billion and RCOM Rs 1.73 billion.

The spectrum auction in 2012 got tepid response as the base price was considered too high by the operators. The government did not receive any bids for spectrum in the 1800 MHz band in Delhi, Mumbai, Karnataka and Rajasthan in 2012 auction but the demand for one-time SUC were raised based on base price. Similarly, the demand for spectrum in the 900 MHz band was raised based on reserve price formula approved by the Cabinet, which was two times higher than the reserve price of spectrum in the 1800 MHz band.

If prices were to be revised in line with the 2013 auction price, operators would get a discount of about up to 51 per cent for Rajasthan circle, 25 per cent in Mumbai circle and 34 per cent in Delhi for spectrum held by them in the 1800 MHz band. Similarly, the final bidding price in 2013 for 900 MHz spectrum (considered two times more efficient than 2G spectrum) was about 5 per cent lower in Delhi and 26 per cent in Mumbai in comparison to base price fixed for 2013 auction.