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Telcos to pay higher licence, spectrum fee

business Updated: Oct 19, 2008 20:50 IST
Manoj Gairola

Telecom operators will have to pay up to 50 per cent higher licence and spectrum fee. The Department of Telecommunications has decided to hike licence and spectrum fee by 1 percentage point across board, Union Communications and IT Minister A Raja told Hindustan Times.

“Discussions are currently on with the Prime Minister and the finance minister,” said Raja. “Two rounds of meetings have already been held.” If implemented, the central exchequer will be richer by at least Rs 2,500 crore per annum. This is set to increase every year initially and may even double in next four to five years as revenues earned by the operators are set to increase.

Consumers are unlikely to be affected, as these fees are an insignificant part of telecom operators’ costs. Plus, competition is set to increase with five new operators getting ready to begin operations by next year.

Telecom operators have to pay a part of their annual revenue as licence fee and spectrum fee. Licence fee varies from 1 per cent to 5 per cent, depending on the area of operations (called circles).

Spectrum fee varies from 2 per cent to 4 per cent, depending on the usage. Besides these two charges, all operators have to pay 5 per cent of their revenue towards universal service obligation (USO) fund.

The National Telecom Policy 1999 and the unified access service licence do not permit auction of licences. Therefore, the only way to increase government coffers is to increase the licence and spectrum fee.

Moreover, if spectrum is auctioned, the government gets only a one-time revenue. An increase in spectrum and licence fee is perpetual revenue and a 1 percentage basis point is substantial amount, said a DoT official.

During the first quarter of this financial year, DoT collected a fee of Rs 4,083 crore as percentage of revenue share. Out of this Rs 1,700 crore was the contribution from spectrum fee, while Rs 2,383 crore came from licence fee and USO fund.

On the basis of this figure, we can estimate that a 1 percentage point increase will push the government’s quarterly inflows up by about Rs 600-700 crore. For the 2008-09, it could be Rs 2,400-2,800 crore.