The government on Thursday approved a proposal to levy a one-time fee on telecom companies holding spectrum beyond a specified limit, to garner almost Rs 31,000 crore.
The move may hit market leaders Bharti Airtel and Vodafone the most. Other operators like Idea Cellular, Reliance Communications, MTNL and Tata Teleservices Ltd also would be impacted by the levy which may translate into higher tariffs for consumers.
Finance Minister P Chidambaram said the Union Cabinet headed by Prime Minister Manmohan Singh accepted an Empowered Group of Ministers' recommendations that mobile phone companies be charged a one-time fee for the excess spectrum they own beyond a cap set by the country's telecom regulator.
"Spectrum will be charged for holdings beyond 4.4 (Mhz) in GSM on auction determined price. For GSM above 6.2 (Mhz), one-time charge will be levied from July 2008 onwards," Finance Minister P Chidambaram said.
The ministerial panel had suggested that GSM-based telecom operators be asked to pay for airwaves they hold beyond 4.4 Mega-Hertz (Mhz) at an auction-determined price, while CDMA carriers pay for holdings beyond 2.5 MHz for the remaining validity of their permits.
Telecom Minister Kapil Said that that operators will have to pay two set of charges. "Prior to January 1, one price (and) after January 1 auction determined price will be levied (for rest of the licence period)," Sibal said.
Telecom operators were earlier given licence for Rs 1,658 crore which also included initial allocation of 4.4 Mhz spectrum and promise of additional 1.8 Mhz spectrum, amounting to total of 6.2 Mhz spectrum, after acquiring certain number of customers on their network.
GSM operators holding more than 6.2 MHz of spectrum will pay a retroactive fee for the airwaves from July 2008 till end of this year.
The price would be the 2001 entry fee duly indexed using State Bank of India Prime Lending Rate divided by 6.2.
He added that telecom operators will be given option to surrender spectrum beyond 4.4 Mhz in GSM.
Telecom operators will be allowed equated annual instalments at interest rate of 9.75 per cent for the balance period of licence. However, the last instalment should be paid not later than 12 calendar months prior to expiry of the licence.
Telecom operators will also have the option of full upfront payment or pre-payment of one or more instalments.
The government, however, could not decide on charging one-time spectrum on CDMA players as there are no bidders for scheduled auction of CDMA spectrum.
As per DoT estimates, if the spectrum is sold at minimum price fixed by it, then government will get Rs 30,927 crore from one-time fee. This estimate inlcuded around Rs 5,900 crore from CDMA players having spectrum beyond 2.5 Mhz.
Telecom Minister Kapil Sibal hoped his ministry's calculations of garnering about Rs 31,000 crore from the surcharge would be met.