DoT cuts 2G licence fees by up to 33%

6 Oct 2008

Larger telcos including Bharti Airtel, Reliance Communications (RCOM) and Bharat Sanchar Nigam Ltd (BSNL) are set to save after the Department of Telecommunications (DoT) announced that it will cut licence fees by up to 33% for those operators whose services cover over 95% of the residential areas in a circle. The Economic Times of India is reporting that, under the proposed changes, the share of gross revenues that telcos must pay to the government as a licence fee will be cut, falling from 10%, 8% and 6% in Category A, B and C circles respectively to 8%, 6% and 4% for those operators who cover 95% of residential zones; the four metro circles – Mumbai, New Delhi, Kolkata and Chennai – are not affected and operators will continue to be charged at 10% of gross revenues despite level of coverage in these areas. The DoT has also clarified that a telco must have ‘identifiable physical infrastructure’ in a given area to be considered as having a presence there, with the communication from the regulator to operators noting. ‘Verification of coverage of each development block shall be based on verification of installation of identifiable physical infrastructure of the licensee for providing telecom access services.’ The new rates will apply from April 2009.

The reduction in licence fee comes following a recent reduction in telco’s contributions to the Universal Service Obligation Fund (USOF), which is used to fund rural telephony. The levy was dropped from a flat 5% of their total revenues in all circles to 3% for those operators with services available to over 95% of residential areas in a circle. According to the report, the changes have been implemented after data compiled by the Telecoms Regulatory Authority of India (TRAI) revealed that the unutilised amount in the USOF was in excess of INR150 billion (USD3.20 billion) at the end of 2007.