India Hikes Spectrum Fees

7:55 AM -- Already reeling under the pressure of the tariff war, India's mobile operators have been dealt another blow by the government's decision to increase spectrum charges for both GSM and CDMA airwaves.

Until now, an operator using spectrum up to 4.4 MHz was paying 2 percent of its Adjusted Gross Revenue (AGR) in spectrum charges. Now, though, that has been increased to 3 percent. For spectrum up to 8.2MHz, service providers will now have to pay 5 percent of their AGR, compared with the 4 percent rate levied currently.

The hardest hit will be those operators using up to 10.2MHz and 12.2MHz, as the rates will increase from 4 percent and 5 percent of AGR, respectively, to 6 and 7 percent.

For spectrum beyond 15.2MHz, the charge has increased from 6 to 8 percent of AGR.

Bharat Sanchar Nigam Ltd. (BSNL) , Bharti Airtel Ltd. (Mumbai: BHARTIARTL), and Reliance Communications Ltd. are going to experience a substantial increase in their fees, because they have the most spectrum, and nearly all of the incumbent operators have more than 4.4MHz.

Currently, Bharti Airtel pays the highest spectrum charges, having paid 3,010 million Indian Rupees (US$65.5 million) for the quarter ended December 2009.

Of course, these tariff hikes will hit the operators' profit margins, and will have a pronounced impact on the new operators that are still building their customer bases and are yet to see any profits.

— Gagandeep Kaur, India Editor, Light Reading

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