India scraps spectrum usage fees before 5G auction

India's government has scrapped spectrum usage charges (SUCs), providing welcome relief for operators planning for an upcoming spectrum auction.

"For spectrum acquired through an auction held after 15.09.2021 [September 15, 2021] in different access spectrum bands, no SUC shall be charged," the Department of Telecommunications (DoT) said in its statement.

Operators would typically pay at least 3% of their Adjusted Gross Revenues (AGR) in SUCs.

The order significantly cuts telco expenditure as operators prepare for the long-awaited 5G spectrum auction next month.

Authorities had promised to scrap SUCs in telecom reforms revealed last September but not published an official order until now.

"The weighted average is to be derived by the sum of the product of spectrum holdings and applicable SUC rate, divided by [a service provider's] total spectrum holding," says the DoT order.

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India's telecom industry was quick to respond approvingly.

"We welcome and thank the Government & Minister of Communications for the much-awaited DoT order regarding the levy of SUC charges for spectrum in 600MHz, 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz, 2500MHz, 3300MHz and 26GHz bands. The order will provide clarity to telecom service providers for the upcoming auctions," said Lt. Gen Dr. SP Kochhar, the director general of the Cellular Operators Association of India (COAI), in prepared remarks.

Nomura Global Markets estimates that the scrapping of SUCs will allow Reliance Jio and Bharti Airtel to save 30 billion Indian rupees ($382.5 million) annually in the long term. Annual savings for Vodafone Idea, India's other big mobile operator, are estimated by Nomura at INR14 billion ($178.5 million).

While the move will help the industry to cut spending on spectrum, it is unlikely to make them buy additional spectrum in next month's auction because minimum prices still remain high.

— Gagandeep Kaur, contributing editor, special to Light Reading

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