5G

 Spectrum usage refers to all the signals that are sent and received across different frequencies. The Department of Telecommunications (DoT) of India is paid up to 3-4% of the companies' adjusted gross revenue as a spectrum usage charge.

In a recent move, the DoT has removed the SUC that the telecom companies paid in a way to help these companies save up for the upcoming 5G auction. In an official statement, the DoT has made it clear that companies that have acquired the access to the spectrum bands after 15-04-2021 in pursuance of the Notice Inviting Applications then need not pay the SUC for now. Suggestively, post the auction the companies will still be paying the SUC, but the average would come down in case a telecom company increases its holdings. 

There was a 3% floor rate on Spectrum Usage Charges for the 5G spectrum and it was introduced during the spectrum auction in February, 2021. The floor was fixed in 2016 and the SUC was brought down to 3% from 4.5-5% in order to encourage more players to participate in auctions. The government came up with a formula to calculate the SUC in such a way that as the companies acquire more holdings the SUC paid would go down. And this would go below the stated 3%, hence the floor rate was introduced to protect government revenues. 

This decision was unveiled with the telecom reforms package in September, 2021. The reforms aimed at bringing in more players into the telecom market to change the current situation where there are few players which could lead to higher prices and poor services. With the reforms the government was also urging the companies with liabilities to convert them in to equity and preference shares so that they will have funds to invest and  provide better services. 

During the fourth quarter of the financial year 2022 Airtel, Jio and Vodafone Idea have paid a 3.6-3.7% of adjusted gross revenue. These companies are allowed to make payment in parts in order to reduce the burden of paying in a single payment.