Telecom Companies Set to Receive Spectrum Charges Waiver

The government is set to waive off spectrum usage charges (SUC) for airwaves purchased during the auctions before September 2021. The move is set to provide relief to telecom companies worth thousands of crores. As per a ToI report, Vodafone Idea, Airtel, and Reliance Jio will conserve cash as they expand 5G services and strengthen their networks, an official source told The Times of India.

Previously, the government removed SUC for spectrum auctioned after September 15, 2021. Currently, the waiver is expected to be extended to the pre-2021 spectrum as well.

“The move to waive off SUC for spectrum bought through auctions before 2022 is likely to be approved soon. The plan is to give relief to the telecom companies so that their network expansion work continues strongly,” the source said.

As per the officials, competitive bidding in previous auctions had already ensured fair pricing, making further taxation through SUC unnecessary. As of now, telecom operators pay SUC at 3-4% of their adjusted gross revenue (AGR) and an 8% licence fee, which includes a 5% contribution to the Universal Service Obligation Fund (USOF).

“The matter has already been discussed within DoT and relevant ministries, and an announcement on the waiver can come soon,” the source added.

Vodafone Idea is set to be the biggest beneficiary of the waiver, which is struggling under a debt burden exceeding ₹2 lakh crore. The source said, “It is believed that the company may get a benefit of around ₹8,000 crore.”

The development comes at a time when Indian telecom operators are preparing for the entry of Elon Musk’s Starlink, which is launching a ₹2-lakh-crore venture in the sector. Though local telecom firms will see their SUC obligations eliminated, Starlink will still be required to pay charges on its spectrum.

The source said, “The reason for Starlink and other satellite operators being asked for SUC is that they will get the spectrum on an administrative basis instead of competitive auctions. The thinking is clear that any company getting spectrum through govt allocation at a pre-determined price will need to pay tax on the spectrum.”

Currently, Vodafone Idea is in deep financial distress. CEO Akshaya Moondra recently urged the Department of Telecommunications (DoT) to convert its upcoming AGR and spectrum purchase dues from the 2012, 2014, 2015, and 2016 auctions into government equity. If everything goes according to the plan, the government's stake in Vodafone Idea could rise to 49% from the current 22.6%.

Vodafone Idea has also told DoT that it does not have the financial capacity to provide a ₹6,091 crore bank guarantee or make a cash payment of ₹5,493 crore to cover a shortfall from the 2015 spectrum auction. The company has requested the DoT not to take “any coercive action” against it.

As of December end, Vodafone Idea’s AGR dues clocked at ₹70,000 crore, while its cash reserves were at a modest ₹12,090 crore.