India - spectrum for 3G

Telecom Commission clears 3-yr lock-in, 3% fee on 3G

The Telecom Commission, the highest decision-making body of the communications ministry, on Tuesday approved the department of telecom’s (DoT) proposal to impose a three-year lock-in on the sale of promoters equity in start-up companies who were given licences earlier this year. It also barred such operators from issuing special dividends in the first three years, a DoT source told ET.

The decision, however, will not impact the Unitech Telecom-Telenor deal and wan-Etisalat tieup. This because the lock-in will apply only in the case of sale of promoter equity and not when investment is brought into the company by a strategic investor by subscribing to fresh equity.

The commission also cleared the 3% (of aggregate revenue) spectrum usage charge on new telcos that will offer third-generation (3G) mobile services. Existing telcos entering the 3G space will have to pay an additional 1% of their aggregate revenues as 3G usage charge. At present, telcos such as Bharti Airtel, Vodafone Essar and Idea pay 2-6% as user charge, depending on the amount of spectrum they hold, for 2G services.

According to the DoT official, the commission also endorsed a 1-2% hike in the usage charge for 2G spectrum, or airwaves on which telecom signals travel. The hike will be a flat 1% for telcos that hold up to 8 MHz of spectrum. Beyond this limit, the charges would go up by a flat 2%. The new charges will be effective from January 1, 2009.

This means, an operator with 4.4 MHz of spectrum in a circle will have to pay 3% of its total revenues as usage charges, up from 2% at present. And an operator who holds 10 MHz of airwaves will have to shell out 6% of its revenues towards spectrum usage charge, up from 4% at present.

The hike in 2G spectrum charges will translate to over Rs 1,000 crore of additional levies for the exchequer, from all operators combined. Since telcos’ revenues are rising, this levy will only go up. The Telecom Commission, however, did not take a decision on the DoT proposal for imposing a one-time fee on GSM operators who hold 2G radio frequencies beyond 6.2 MHz.

A positive decision would have impacted Bharti Airtel, Vodafone and Idea. “The proposal was considered, but we did not take a final decision on this. It has been deferred for a period of 15 days as both the Planning Commission and the department of industrial policy and promotion want to send their inputs,” a DoT official said.