Spectrum usage charges lowered ahead of 2G auction

To increase bidding interest at the forthcoming 2G spectrum auction, the government today lowered the spectrum usage charges for the new spectrum on offer.

Spectrum usage charges are levied annually as a percentage of revenue earned by telecom companies. Telecom minister Kapil Sibal said that the Empowered Group of Ministers has fixed the maximum spectrum charges at 5 per cent. Earlier, the telecom players were paying between 3 per cent and 8 per cent as spectrum charges.

Explaining the levy of spectrum charges, Mr Sibal said the fee would be based on weighted average of the old spectrum that incumbent telecom players hold and the new spectrum they may gain in the forthcoming auction.

Karan Mittal of ICICI Securities told NDTV that new spectrum usage charges will be beneficial for incumbents like Bharti Airtel.

India's leading mobile phone operators as well as aspiring new entrant Reliance Industries have applied to bid for the 2G auction which will kick off on February 3.

"Earlier, there was uncertainty over spectrum charges but now telcom companies will have far more clarity. A fixed charge is far more beneficial than progressively increasing charges. We expect 100-150 basis points margin expansion for incumbents," he added.

Romal Shetty of KPMG also agreed that the new spectrum levy norms would be positive for telecom companies. "The rates have come down to 5 per cent, which is the maximum charge incumbents will have to pay. The operators now know what would be their outflow, so they would be clear before bidding for spectrum," he added.

The Empowered Group of Ministers also fixed the 4G spectrum usage fee at 1 per cent.

Eight companies including Bharti Airtel Ltd and Vodafone Group are also in the fray for the 2G spectrum.