The Digital Communications Commission has asked the DoT to seek Trai’s view on allocating 700 MHz spectrum to the Railways without auction
With Department of Economic Affairs Secretary Atanu Chakraborty making it clear that the government has not reckoned on the adjusted gross revenues (AGR) of telcos in the Budget, a more than doubling of revenues from “other communications services” can happen only if most of the spectrum comes under the hammer in upcoming auctions at the base price.
This would also include the spectrum for 5G services, despite the fact that all telcos have publicly stated that they won’t go for 5G at the current base price.
Simply stated, the government expects the telcos, which are projected to have AGR of Rs 2 trillion for FY21 (this year they pay Rs 1.6 trillion), will give back the bulk of its earnings of over Rs 1.33 trillion as revenue to the government.
Because that number is the projected revenue that the government expects to earn from communications services for FY 21 in the budget up from Rs 58,989 crore in the revised estimates for FY 20. And if that is not enough telcos also faces the spectre of paying another Rs 1.47 trillion in AGR dues as directed by the Supreme Court. They have agreed to pay, but have are waiting directions from the apex court on whether they can discuss a staggered payment scheme with the government.
Other communications services include license fee, spectrum user charges, deferred spectrum and some sundry others.
Clearly the government is pinning its hope very highly on the mega success of the spectrum auction. However, the Cellular Operators Association of India (COAI) does not see more than Rs 25,000 crore to Rs 30,000 crore coming from auctions as upfront payment next financial year.
However, if the government has to reach its target it has to bank on the fact that it will be able to rustle up over Rs 465,674 crore from selling most of the spectrum in the upcoming auction at the base price which include the 5G band as spectrum for 4G in the valuable 700, 800, 2100, 2300 and 2500 band based on COAI
estimates. With telcos having to pay roughly 25 per cent of it upfront they can rustle up Rs 1.16 trillion next year from auctions alone.
Telcos say that they expect about another Rs 20,000 crore to Rs 25,000 crore from license fee and SUC, which will be higher than what they pay this year (around Rs 16,000 crore). They expect AGR to be higher by 25 per cent due to tariff increases. Licence fee and SUC are calculated as a percentage of AGR (it is around 13 per cent). So that would bring the government comfortably to their target for this year.
In the next financial year, the government which has agreed to a moratorium of deferred spectrum payment for two years however will not get Rs 25,000 crore which was assured annually for them.
Yet telcos say that it is pure over optimism. For one, the industry under financial stress has been looking for support from the government will only buy spectrum as much as required to ensure that they can cater to the growing data needs. On top of it they have to fork out Rs 1.47 trillion as AGR dues due to the Supreme court.
All the telcos have made it clear they are not interested in 5G. In that scenario the upfront payment would come down to Rs 82,500 crore, assuming the entire non 5G earmarked spectrum is sold.