India cuts spectrum fee for big telcos to spur bids

NEW DELHI Mon Jan 27, 2014 1:43pm IST

1 of 2. A Micromax mobile phone is kept on display at a showroom in New Delhi December 6, 2013.

Credit: Reuters/Adnan Abidi/Files

Related Topics

Stocks

   

NEW DELHI (Reuters) - Telecommunication companies buying airwaves in an Indian auction next month will pay 5 percent of their revenue as an annual fee, a ministerial panel decided on Monday, a move that means lower payments for bigger carriers Bharti Airtel (BRTI.NS) and the Indian unit of Vodafone (VOD.L).

The move scraps the 3-8 percent fee range the country currently levies in an effort to coax previously reluctant operators into taking part in India's third attempt at auctioning two frequency bands for billions of dollars.

The new rate is higher than the 3 percent flat rate suggested by an independent sector regulator, which had proposed abolishing the current levy of five different rates depending on the quantum of spectrum held by a carrier.

The government may lose some revenue it collects as annual fees due to the new rate, Telecommunications Minister Kapil Sibal said after the meeting of the ministerial group, but expects it to help companies buy more spectrum in the auction starting February 3.

"No big losers, no big winners," Sibal said. "A successful auction means greater investment in the sector," he said, explaining the rationale for the new rate.

After two previous attempts to pull off the sale were boycotted by major mobile phone operators that complained minimum bid prices were too high, India cut sharply the floor bid price for the February auction, helping it lure interest from eight carriers including the market leaders.

That still did not guarantee a successful sale as carriers including Bharti and Vodafone demanded a cut in the recurring annual fee they pay on the top of the winning bid price for using airwaves. India expects to raise at least $1.8 billion this year from the spectrum auction.

"I think it's a mixed blessing. We are pleased that it's capped at 5 percent," said Rajan Mathews, director general at the Cellular Operators' Association of India after the ministerial panel's decision on Monday.

Bharti and Vodafone must buy spectrum in the February auction to renew their permits in some key cities and are expected to benefit from the 5 percent cap because they currently pay around 6 percent of their revenue in annual fees in those markets.

But smaller carriers that pay less than 5 percent currently, will tend to move towards the 5 percent rate gradually if they buy more spectrum from the auction, Mathews said.

The total spectrum fee for carriers' existing spectrum and new spectrum from the February auction will be calculated based on a weighted average of the old and new fee, Sibal said.

Sibal said companies like Reliance Industries Ltd (RELI.NS), which bought 4G spectrum in a 2010 auction, will continue to pay 1 percent of their revenue as annual fee for that spectrum. Reliance, which is also bidding in the February auction, had opposed any change in the fee for 4G spectrum.

(Editing by Matt Driskill)

FILED UNDER:

Reuters Showcase

Markets Weekahead

Markets Weekahead

Focus on sectors which will build India: Ambareesh Baliga.  Full Article 

FMC-SEBI Merger

FMC-SEBI Merger

Regulatory shakeup could revive commodities markets   Full Article 

Tax Incentives

Tax Incentives

Budget woos foreign investors  Full Article 

Excise Duty

Excise Duty

Cigarette makers fall after budget hikes excise duty  Full Article 

Welcoming the Budget

Welcoming the Budget

India Inc cheers corporate tax cut, simpler rules  Full Article 

Gold Price

Gold Price

Gold prices to rise after budget keeps import duty high  Full Article 

Fuel Prices

Fuel Prices

IOC to raise diesel, petrol prices from Sunday  Full Article 

Moody's on Budget

Moody's on Budget

Budget "credit neutral" from a ratings perspective - Moody's   Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage