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EGoM to decide on spectrum fees, telecom M&A rules tomorrow

New Delhi, Jan 26, 2014, (PTI)
The Empowered Group of Ministers on telecom, headed by Finance Minister P Chidambaram, is likely to take a final call on the contentious issue of spectrum fee and long-awaited mergers and acquisitions norms. Reuters File Photo.

The Empowered Group of Ministers on telecom, headed by Finance Minister P Chidambaram, is likely to take a final call on the contentious issue of spectrum fee and long-awaited mergers and acquisitions norms.

"EGoM will meet on Monday. Hopefully a final decision should be taken on spectrum usage charge. Merger and acquisition guidelines are almost ready but were not released pending a legal opinion. A final decision is also expected on the same," an official source told PTI.

Meanwhile, the Department of Telecom has extended the last date to withdraw applications for the upcoming spectrum auction to January 28 from January 27 earlier.

The inter-ministerial panel Telecom Commission on Saturday recommended three options for levying annual spectrum usage charge (SUC) on telecom operators.

GSM firms such as Bharti Airtel, Vodafone and Idea Cellular have locked horns with Mukesh Ambani-led Reliance Jio Infocomm following the TRAI's recommendation of a uniform SUC.

The charge is levied annually by the government as a percentage of revenue earned from telecom services.

It currently ranges from 3 to 8 per cent for mobile operators, while for firms with Broadband Wireless Access (BWA) spectrum such as Reliance Jio Infocomm Ltd and Tikona, the fee is 1 per cent.

Sources said the panel is learnt to have worked out three options for the SUC on BWA spectrum. One of the options is levying the weighted average of 1 per cent on BWA and 3 per cent when combined with other sets of airwaves.

However, the Attorney General is understood to have advised against revising the BWA spectrum levy and has suggested that the government continue with the current rate of 1 per cent and not club revenue generated from any other set of airwaves.

Eight telecom service providers, including 7 GSM operators, have applied to participate in the spectrum auction scheduled to start on February 3.

There were no bidders in the March auctions and only five in the November 2012 auctions, indicating huge interest in the forthcoming offer of airwaves.

The applicants include Reliance Jio Infocomm, Vodafone, Airtel, Aircel, Tata Teleservices, Idea Cellular, Telewings (Uninor) and Reliance Communications.

The matter is crucial for the spectrum auction scheduled to start on February 3, from which the government expects to raise at least Rs 11,300 crore to curb the fiscal deficit.

The EGoM will also consider the Telecom Regulatory Authority of India's recommendation for a uniform spectrum usage charge (SUC) of 3 to 5 per cent from April 1 across the sector. 

Sources said the Commission suggested levying an SUC equivalent to the weighted average of 3 per cent for spectrum won in the upcoming auction and the existing slab rate.

The second option is the weighted average of 5 per cent for the airwaves to be auctioned and the current slab rate.

The third recommendation is to continue with the existing regime, the sources said.
Besides this, the EGoM approved the M&A guidelines but it will need cabinet approval if legal opinion has finds that the consolidation activity amounts to sale of equity.

As per the guidelines approved by EGoM, market share of a merged entity should not exceed 50 per cent of the subscriber base and companies who have procured spectrum through auction will not have to pay additional money to government for airwaves.

However, companies who were allocated spectrum at old rate of Rs 1,658 crore will need to difference between market and old rate to government when they participate in consolidation activity. 


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