Despite Montek opposition will Cabinet charge spectrum fee?

New Delhi: The Union Cabinet is expected to meet this week to clear the one-time fee incumbent telcos have to pay for excess spectrum they hold. As per calculations of the Empowered Group of Ministers (EGoM) which met on the 8th of October and decided the norms for one-time charge, the Government is hoping to raise about Rs 27,000 crore through this exercise. But will the government actually pull it off?

Two developments over the weekend could well force the Government to rethink its decision. For one, it has emerged that in asking telcos to cough up money for having spectrum in excess of 4.4 mhz in GSM and 2.5 mhz in CDMA, the EGoM went against not one but two opinions to the contrary. This decision goes against the opinions of the Attorney General as well of Planning Commission’s Deputy Chairman Montek Singh Ahluwalia. Firstpost reviewed a letter which Ahluwalia had sent to Chidambaram just a day before the EGoM meeting was held, where he has clearly argued for charging incumbent telcos only beyond 6.2 mhz/5mhz for GSM/CDMA.

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[caption id=“attachment_490270” align=“alignleft” width=“380”]  Montek and Auspi have opposed the charge of the one-time spectrum fee. AFP[/caption]

The second development pertains to the Association of Unified Telecom Service Providers of India (AUSPI) writing a letter to the Prime Minister, where it has sought the PM’s intervention over reversing the EGoM decision. AUSPI is a lobby for CDMA service providers and in its letter has pointed out that 6.2 mhz of GSM spectrum and 5 mhz of CDMA spectrum are contractual limits and therefore incumbents should not be charged up to these limits. It has also sought levy of charge retrospectively from 2008.

But why did the EGoM decide to levy charges beyond 4.4mhz/2.5mhz for GSM/CDMA in the first place? Official sources had explained after the EGoM that the option to charge existing operators above the contracted spectrum of 6.2 MHz was not chosen since this could have led to claims from operators who had been assigned only 4.4 Mhz for allocation of the remaining airwaves without any charge. As per current license terms, the Government is obliged to provide spectrum up to 6.2 Mhz to GSM operators.

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“Such a situation may not be conducive to ensuring a level playing field between existing and new players since the new entrants would be paying for their entire spectrum at the auction price,” these sources had said.

According to the AUSPI letter, Bharti Airtel received more than the contracted 6.2 mhz GSM spectrum in 11 circles - Gujarat, Haryana, Kerala, Madhya Pradesh, Maharashtra, Mumbai, Tamil Nadu, UP West, UP East, Bihar and Orissa. AUSPI’s calculations have included circles where Bharti got over 6.2 mhz in the 900 mhz band too. The association has alleged that Vodafone got excess spectrum in four circles - Andhra Pradesh, Chennai, Karnataka and UP West whereas Idea Cellular got it in Delhi. None of these figures have been confirmed by us with the respective telcos.

The AUSPI letter points out that the “Concept of imposing prospective charge below the contracted limit clearly favours dominant GSM operators as they have the shortest period of validity of the license….late entrants like our member operators have eight years of remaining validity period of the license, thus would be affected the most. Our member operators would have to pay eight times the charges on per mhz basis for CDMA spectrum vis-a-vis dominant incumbent GSM operators.”

In his letter, written on October 7, Ahluwalia gave two main reasons for opposing one time fee after 4.4/2.5 mhz of GSM/CDMA spectrum. Firstly, he said that 6.2 was the contracted spectrum and subject to the AG’s opinion, “I would emphasise that we should respect the sanctity of the contract”. The Planning Commission Deputy Chairman went on to further say that if, in fact, telcos were told earlier that license terms and conditions could be changed later, license terms should be revised to make the terms of intervention clearer.

His second argument was that it is unfair to allow those telcos who already have spectrum upto 6.2 mhz in GSM to continue to use it without payment while those who got only 4.4 mhz have to bid in an auction to get additional spectrum even upto 6.2 mhz. Is Chidambaram listening?