Analysts hailed the government’s decision to introduce a new structure for charging spectrum usage fees for telecom companies saying the move would encourage fresh investments in the sector, apart from boosting the upcoming spectrum auctions on February 3.
The government on Monday announced it would cap spectrum usage charges (SUC) for telecom companies at 5 percent of annual revenues for any spectrum sold hereon, while leaving the SUC at 1 percent for 4G spectrum, as before.
Earlier, SUC was decided on the basis of the amount of spectrum that companies held, which resulted in the fee ranging from as little as 3 percent for small players and as much as 8 percent for big companies such as Vodafone or Airtel.
Also read: Telecom EGoM caps new spectrum usage fee at 5%
“To have the government come out and introduce an across-the-board chart for incumbents is a great step forward,” telecom analyst Kunal Bajaj told CNBC-TV18. The government has taken a proactive step with a long-term vision.”
Bajaj also lauded the government’s decision of sticking to its commitment it had made to broadband wireless access (4G) spectrum holders of keeping the SUC at 1 percent.
The increased clarity is expected to provide a fillip to the upcoming 2G spectrum auctions that are scheduled on February 3, according to Romal Shetty of consulting firm KPMG.
“Telecom firms make business plans for a five- or ten-year period,” he said. “Now that they know the exact charge that they would be levied, it would be easier for them calculate their return on investments.”
Shetty said he expected telecom firms would be more aggressive with bidding though he added the recent consolidation in the telecom industry could play some dampener. “If there are a large number of operators [during bidding], some may back off because this could trigger a fresh pricing war.”
“The new rule could result in savings of 1 percent for telecom firms,” said Harit Shah of Nirmal Bang Institutional Equities, adding that while he was yet to work out details, many firms were earlier paying more than 5 percent in SUC.
Bajaj said the biggest beneficiary from the move among listed companies would be Airtel, thanks to its large pan-India presence. “Airtel holds the maximum amount of spectrum,” he said, adding that Idea, another large player, can also now be expected to push its growth strategy more aggressively.
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