Telecom Commission roots for 3% SUC from next auction

New Delhi: In what could be good news to mobile operators, the inter-ministerial panel Telecom Commission Tuesday backed lowering of spectrum usage charge to 3 percent of their annual revenue.

The panel also decided that the payout for carriers in any case will be not be lower than what they are currently paying at the existing rate to prevent loss of revenue to the government.

"For future auction, the Telecom Commission stood by its earlier recommendation to levy 3 percent SUC," an official source said.

The Telecom Regulatory Authority of India (TRAI) has recommended SUC at a uniform rate of 3 percent across the industry and gradually bringing it to 1 percent.

Before 2010, there was only 2G spectrum and hence, calculation of revenue was easy. But the process became complex after new frequencies were allocated to companies for services like 3G and 4G.

A technical panel of the Department of Telecom has said it is difficult to segregate revenue of companies holding airwaves in multiple bands.

The SUC has been one of most contentious issues of late. Reliance Jio has opposed levying of uniform SUC rates as suggested by TRAI as it pays only 1 percent on its spectrum in 2300 Mhz band (broadband wireless access)and the proposal to levy 3 percent would put extra burden on the company.

The government in January 2014 decided to cap SUC at a flat 5 percent for spectrum that was to be procured in future auctions.

At that point, telecom operators were asked to pay the weighted average of their existing SUC (on the old rate of 3-8 percent) based on the quantum of spectrum they hold and 5 percent if they acquire new spectrum.

For BWA spectrum holders like Reliance Jio, Airtel and Aircel, the same method was put in place, considering 1 percent SUC on airwaves held by them in 2300 Mhz band.

With the new formula, operators will have to pay the weighted average of the current rates and 3 percent for spectrum to be procured in future.

The companies that do not procure spectrum in future auctions will continue to pay the existing rate.

"To prevent loss of revenue for the government, telecom operators will pay a minimum amount which they are paying as per 2015-16 rates," the source said.

The annual SUC collection is at around Rs 7,000 crore.

The Department of Telecom will move a Cabinet note for inter-ministerial consultations on spectrum auction in a week and place it before the Cabinet for a final decision after feedback.

The commission also suggested auction of all the spectrum bands simultaneously, the source added.

The government is in the process of holding one of the biggest spectrum auctions in which airwaves worth at least Rs 5.66 crore will be put up for sale. The industry has requested the government to defer auction of 700 Mhz frequency band which alone accounts for about Rs 4 lakh crore.

"The upcoming auction will resolve all spectrum related issues of the industry whether it is linked to quality of service or bandwidth shortage," the source said.