All existing Operators to pay a one time fee on spectrum beyond 4.4 Mhz

Union Government has approved a one-time levy on existing telecom operators which hold 2G spectrum beyond 4.4 MHz at a price to be discovered by next week’s auction.

The Empowered Group of Ministers (EGoM) had earlier recommended the levy which would help create a level-playing field between old and new operators.

Briefing the media after the cabinet meeting, Finance Minister P. Chidambaram said while GSM operators would be asked to pay for airwaves they hold beyond 4.4 MHz at a price determined by the auction starting Nov 12, CDMA carriers would 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 airwaves from July 2008.

No charge will be levied on operators who hold up to 4.4 MHz of spectrum.

Chidambaram said while the price discovered in the auction would apply for the one-time fee to be charged from incumbent GSM operators, the Department of Telecom (DoT) would work out the basis for the same for CDMA carriers as there are no bidders for CDMA auction and thus there will be no auction determined price.

There is no bidder left now for the CDMA auction after Tata Teleservices and Videocon Telecommunications withdrew from the spectrum sale.

Chidambaram said the DoT had been asked to get back to the cabinet about implementation of the decision regarding CDMA.

The government had planned two separate auctions for GSM and CDMA players. And the DoT had estimated that the levy would generate Rs.30,927 crore. But with the exact quantum of levy onCDMA operators yet to be fixed, the government’s net revenue could not be ascertained.

Chidambaram also said licensees “will be given an option to surrender spectrum beyond 4.4 MHz for GSM” if they don’t want to pay the one-time fee.

Also, payments can be made in monthly instalments at an interest of 9.75 percent.

“Licensees will be allowed equated annual instalments for the balance number of years of license at the rate of 9.75 percent,” said an official statement.

For spectrum held above 6.2 MHz, the one-time charge will be applicable from July, 2008 onwards and linked to the price at which spectrum will be sold at the auction.

The statement said that the one-time charge calculations shall be based upon a pro-rated price for the period July 2008 up to the date of fresh auction’s determined price.

“This (charge) would be the 2001 entry fee divided by 6.2, duly indexed using State Bank of India Prime Lending Rate (SBI PLR),” it said.

The cabinet also accepted the proposal by the ministerial panel to allow operators to share airwaves.

It also decided to do away with the provision to levy a special levy on mergers and acquisitions (M&As) in the sector.