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Spectrum Usage Charge floor set at 3%, raises cost for Reliance Jio, Airtel

The new formula will increase cost for telcos but not impact upcoming airwave bidding

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Less than a month after taking office, telecom minister Manoj Sinha held his first meeting with the CEOs of telecom operators on Monday.

On the same day, the Telecom Commission (TC), an inter-ministerial decision-making body, came out with its decision to retain the existing weighted average formula to compute the spectrum usage charge (SUC) paid by telecom companies but with a floor rate of 3%.

Currently, mobile service providers pay SUC rate based on the type of frequency.

Telecom watchdog Telecom Regulatory Authority of India (Trai) had recommended a flat rate of SUC.

Rajan Mathews, director general, Cellular Operators Association of India (COAI), said the TC's decision on SUC was disappointing for the industry.

"We are disappointed because we have always said that we would like a flat SUC regime at 3% moving to 1%, as per the Trai recommendation. So, keeping a weighted average methodology with a 3% floor is disappointing for the industry," said the spokesperson of the GSM operators' lobby body.

The announcement on SUC was crucial for the upcoming auction of airwaves that is likely to be held in September. The new rate would increase cost for telecom players like Reliance Jio and Airtel, which are currently paying a lower rate than 3%. Now, with the base rate fixed at 3%, their airwave usage payout would be higher.

However, telecom experts do not expect it to have any significant impact on bidding decisions of telcos.

"It will have a marginal impact on the bidding because it will increase the cost of acquiring spectrum," said COAI's Mathews.

Mahesh Uppal, director of the telecom consultancy firm ComFirst India, also said even though it was a disappointing decision it will not affect bidding decision.

"It is a disappointment but I don't think it will affect their (telcos) bidding decision. Though, it will eventually put an additional burden on telecom companies, who will then have less to spend on the rollout of services in areas where services are rolled out last (remote and rural areas). So, to that extent, it is not an enlightened decision," he said.

Uppal expects the government to finally move to a flat rate of SUC: "Simplicity and transparency are critical. That is something that needs to happen sooner rather than later".

Mathews said the newly appointed telecom minister was looking for help from the industry to realise the goals of one of Prime Minister Narendra Modi's pet initiative Digital India.

"(The telecom minister) asked the industry to help the government in achieving the goals of Digital India of mobile inclusion, connecting the over one billion (Indian population) and addressing the call drop issue. Those were all the matters he asked the industry to address," he said.

At Sinha's meeting with telecom honchos, the industry informed him that of the 60,000 Base Transceiver Station (BTS) stated in 100-day action plan chalked out recently, already around 38,000 BTS had been put up in 45 days.

Mathews said telcos were targeting to set up close to one lakh BTS in one year at a cost of Rs20,000 crore. He said there was no discussion of SUC or rationalisation of levies at the meeting.

Talking to the press, Sinha said he was satisfied with the steps taken by telcos for control call drop rate but he wanted them to improve the network further to improve service quality in both voice and data.

"In data, we haven't reached a place where we should be," the minister said.

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