Cabinet clears Rs 31k crore spectrum levy on incumbent operators

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The Cabinet on Thursday approved levy of about Rs 31,000 crore as one-time fee on spectrum held by incumbent telecom firms such as Bharti Airtel and Vodafone in an attempt to create level playing field between old and new operators.

Finance Minister P. Chidambaram said the Cabinet has approved the recommendation of an Empowered Group of Ministers that GSM-based telecom operators be asked to pay for airwaves they hold beyond 4.4 Mega-Hertz at an auction-determined price, while CDMA carriers pay for holdings beyond 2.5 MHz, for the remaining validity of their permits.

GSM-operators holding more than 6.2 MHz of spectrum will pay a retroactive fee for the airwaves from July 2008.

Chidambaram said while the price discovered in the auction beginning November 12 will apply for the one-time fee to be charged from incumbent GSM operators, the Department of Telecom (DoT) will work out the basis for the same for CDMA carriers.

This is because there is no bidder for CDMA auction now and so there will be no auction determined price, he said. "Similar recommendations (of auction determined price being levied) were made for CDMA but there has been subsequent developments since the EGoM meeting that bidders who had evinced interest for CDMA auction have withdrawn from the auction. Therefore there is no auction now for the CDMA," he said.

"DoT has been requested to come back to the Cabinet regarding implementation of the decision regarding CDMA," he added.

The government had planned to hold two separate auctions for spectrum used by GSM and CDMA-based mobile phone carriers hoping to reap a combined Rs 40,000 crore revenue.

It has set a base price of Rs 14,000 crore for 5 MHz of a pan-India GSM spectrum, more than seven times what companies paid in 2008 to get telecom licenses. For CDMA, the base price was set at 1.3 times the GSM airwaves.

However, no bidder is left in fray for CDMA auction after Tata Teleservices and Videocon Telecommunications withdrew from the sale.

Chidambaram said licensees ‘will be given an option to surrender spectrum beyond 4.4 MHz for GSM’ if they don't want the one-time fee. Also, payments can be made in monthly instalments at 9.75 per cent interest rate.