High spectrum usage fee hurting investments by large India telcos, says GSMA

NEW DELHI: UK-based telecom lobby group GSMA has said that there is a need to gradually reduce spectrum usage charge (SUC) in India from the present flat 5% for auctioned airwaves, as the fee could derail the investment plans of large incumbent operators.
Citing a Coleago study, the GSM lobby group said that the flat SUC regime is challenging to large operators which invest more into their networks, which results in reduced profitability and lower return on investment, thus discouraging investments to improve services.

“A telco that passes more traffic through a given amount of spectrum due to a better network and delivers more economic benefit to the country, ultimately ends up paying more usage charge as compared to other incumbents,” GSMA India head Sandeep Karanwal told ET.

SUC is levied annually by the government as a percentage of revenue earned from telecom services. The telecom operators have been up against its continuity, saying that since they acquire airwaves by paying market-determined price, they should not be asked for the usage charge.

“Multiple taxes are counter-productive as they curb the rollout of infrastructure and services. We recommend government to avoid high spectrum charges, since the value of spectrum is now already factored into the auction mechanism,” Karanwal said.

He believes that the next wave of mobile subscriber growth is expected to come from India’s rural areas, where the cost of providing the services is higher and the per-capita income is significantly lower. Therefore, he said, “It’s high time to trim down the usage charge.”

"Operators will be encouraged to invest more if the usage charge is significantly reduced," Nitin Sapra, the spectrum policy and regulatory affairs manager, said.