Retrospective spectrum pricing could earn govt Rs 40k crore

So the Attorney General’s view has prevailed, not that of Telecom Minister Kapil Sibal. The Empowered Group of Ministers (EGoM) which met this evening to consider the issue of one-time charge for excess spectrum upheld what the AG has been saying all along: charge those telcos which held excess spectrum or spectrum over the limit of 6.2mz of GSM spectrum retrospectively from July 2008.

Others are charged prospectively, above 4.4 mhz for GSM and above 2.5 mhz for CDMA, at the price which will be discovered in the upcoming auctions.

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According to CNBC TV18, today’s decision could generate a little less than Rs 40,000 crore for the Government since incumbent telcos such as Bharti Airtel, Vodafone, BSNL and MTNL will have to fork out large sums for spectrum above 6.2 mhz from July 2008.

For these telcos, pricing has been indexed to the prices of 2001. According to agency reports, Sibal said after the EGoM meeting that 54 licensees who held GSM spectrum beyond 6.2 mhz in 2008 will be charged retrospectively.

The CNBC TV18 report pointed out that with today’s decision, companies like Reliance Communications will not need to pay anything immediately. After the last EGoM meeting, where 4.4 mhz had been fixed as the cutoff point for excess charge, Sibal had said that this measure would generate close to Rs 27,000 crore.

A story in the Hindu Business Line this morning quoted the AG saying that the Empowered Group of Ministers’ (EGoM’s) earlier decision to charge one-time fee only from operators with more than 4.4 Mhz spectrum prospectively should stand legal scrutiny.

In his opinion before the first EGoM decision, the AG had clearly said that the one-time fee should be collected from all operators with more than 6.2 Mhz. And that this fee should be collected from July 2008 onwards. But the EGoM held on October 8 overruled this view and decided to impose the fee on all firms with more than 4.4 Mhz spectrum.

The EGoM meeting has been able to decide on the contentious issue of one-time charge but according to agency reports, it deferred any decision on refarming of 900 mhz spectrum. Yesterday, the Telecom Commission had recommended that all incumbent telcos need to surrender spectrum in the 900 mhz frequency at the time of license renewal.

They can then bid back this spectrum at new, higher prices or opt for the less efficient 1800 mhz, whose base price for upcoming auctions has been set at Rs 14000 crore for 5 mhz.

The agency reports quoted Sibal as saying that a decision was deferred on refarming as “there wasn’t enough time.” The minister also said that “We intend to take a decision on the refarming issue prior to start of auction (of spectrum vacated from cancellation of 2G licences by the Supreme Court),” Sibal said. “Hopefully a week before the start of the auction.” The government plans to begin auction of telecom spectrum on November 12.