Reliance Jio asks govt not to change spectrum charges, warns of losses

Bharti and Reliance Jio Infocomm have partnered for back end telecom infrastructure in a mega deal recently but they have not ceased to be warring competitors. In a strongly worded letter this morning addressed to Telecom Minister Kapil Sibal, Reliance has said that a flat spectrum usage charge, if implemented, should not be done retrospectively - it should not be applied to spectrum or airwaves already held.

Spectrum Usage Charge is the levy telecom companies pay based on their adjusted gross revenues, an annual fee which is over and above the price they pay for acquiring airwaves. Sector regulator TRAI has suggested that instead of the present slabs from 3-8%, SUC should be made flat at 3%. Reliance is a BWA 4G spectrum holder and per its license conditions, it is charged 1% of revenues as SUC. If the Government accepts TRAI’s recommendations, Reliance will have to pay three times more in SUC which is why it has been lobbying against the proposal for a flat SUC.

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The letter, which was reviewed by Firstpost, makes multiple references to the powerful GSM operators - all these companies have supported a flat SUC regime since it will obviously bring down their total payout in usage charges. Last week, CEOs of rival telecom companies Airtel, Vodafone, Idea Cellular and Telenor, had said in a joint letter that participation in the upcoming spectrum auctions was dependent on a firm decision on the SUC issue. All these companies are supporting flat SUC instead of the current 3-8% slabs.

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In its submission today, Reliance has made several interesting points:

1. The 1% rate of SUC for its BWA 4G spectrum comes from conditions which were laid down well before the auctions in 2010 and there is no provision for changing this condition

2. Any retrospective reduction in SUC will lead to a huge loss to the Government

3. Incumbent telcos stand to gain “windfall profits” if SUC is charged at flat 3%; these players will gain undue advantage because they already hold the largest chunk of spectrum compared to a new entrant who will stand to lose nothing by lowering of SUC. Is Reliance indicating here its intent to participate for 1800 mhz and 900 mhz spectrum auctions, scheduled from Februray?

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4. There is no threat to success of February auctions if SUC rates are not rationalised.

5. Reliance has made one concession though - its protests seem limited to any retrospective changes in SUC and the company is not protesting flat SUC levy for future.

The SUC issue needs to be resolved quickly, preferably before the auctions begin.

Disclosure: The Reliance Group has funded the promoter of Network18, which publishes Firstpost