FAQ: What does new spectrum fee rule mean for telcos

Also read: Telecom EGoM caps new spectrum usage fee at 5%

Here is a quick guide to understanding what the development means:

What was the issue?

SUC was earlier levied on the basis of the amount of spectrum that companies held. As a result, large players such as Bharti Airtel and Vodafone ended up paying SUC that would be as high as 8 percent while smaller players paid as little as 3 percent.

How will the new effective rate come down for big players?

If a company was paying 6.2 percent SUC for its earlier spectrum, the new weighted-average cost (assuming an equal amount of existing and new airwaves) would be come to 5.6 percent.

What was the industry’s view on this?

Large players favoured a flat SUC structure while many small players were in favour of continuing with the existing structure.

Will the new development negatively impact 4G license holders such as Reliance Jio that hold less spectrum?

No. The government decided to continue to charge BWA, or 4G, spectrum fee at 1 percent.

How much will lower spectrum fees result in loss for the exchequer?

While Telecom Minister Kapil Sibal admitted the “rationalization” would impact government revenues, he did not peg a figure. Analysts expect the loss to be around Rs 1,000 crore for the next 10 years. Sibal added that revenue loss would be made up with the expansion of the sector that this move will likely bring in.

Will the move have an impact on the upcoming spectrum auctions on February 3?

With lower fees and greater clarity on usage fees, companies will likely bid more aggressively for spectrum auction. In fact, the auction was postponed from January to February only for this decision to be taken.