Scrapping of SUC could lead to Rs 3000 crore cost savings for telcos

Nomura estimates that the scrapping of SUC for future spectrum auctions could lead to Rs 3000 crore in annual cost savings for Reliance Jio and Bharti Airtel and Rs 1400 crore for Vodafone Idea in the longer term.

The Department of Telecommunications (DoT) has scrapped the 3 percent floor on spectrum usage charge (SUC) via an order dated June 21, 2022.

The Central Government order prescribed:

• For spectrum acquired through auctions held after 15.09.2021 in different Access spectrum bands, no SUC shall be charged.
• The weighted average of SUC rates across all spectrum assigned to an operator (whether assigned administratively or through auction or through trading) in all Access Spectrum Bands including Broadband Wireless Access spectrum in 2300 MHz/2500 MHz band acquired in 2010 auction shall be applied for charging SUC. The weighted average is to be derived by sum of product of spectrum holdings and applicable SUC rate divided by total specirum holding. The Weighted Average Rate should be determined operator-wise for each service area.
• For the purpose of calculation of spectrum usage charges, there shall be a minimum/presumptive AGR which shall be not less than 5% of the bid amount. The calculation of spectrum usage charges shall be on the basis of minimum/presumptive AGR or the actual AGR whichever is higher.
• The weighted average rate shall be kept to two decimal points by rounding off the second decimal figure to the next higher digit. The rounding off shall be made to next higher digit at two decimal points even if the third decimal point is less than 5.

The order superseded the earlier Order Nos. P-14010/05/2016 dated August 12, 2016 and L-14010/01/2021-NTG dated February 26, 2021.

COAI welcomed the order. “We welcome and thank the Government & Minister of Communications for the much-awaited DoT order regarding the levy of SUC charges for spectrum in 600 MHz, 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz 2500 MHz, 3300 MHz and 26 GHz bands. The order will provide clarity to telecom service providers for the upcoming auctions,” said Lt. Gen. Dr. SP Kochhar, DG, COAI.

For detailed order and method of calculation – https://www.communicationstoday.co.in/spectrum-usage-charge-order-dated-june-21-2022-dot/

Also read – https://www.communicationstoday.co.in/abolishing-suc-meaningless-unless-3-floor-rate-levied-on-agr-removed-say-telcos/

CT Bureau