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Telcos Face Another Rs 22,000 Crore Loss

The massive Rs 1.33-lakh-crore hit which the telecom operators have had to take recently due to more than a decade old dispute relating to calculation of adjusted gross revenue apart, there’s another time bomb which is ticking for the industry, which could add to its burden another Rs 22,000 crore.

This is the amount which the department of telecommunications has charged the operators for holding excess spectrum — beyond 4.4 Mhz —which is referred to as one-time spectrum charge (OTSC).

Here again, the maximum — around Rs 12,623 crore — is owed by the two incumbents, Bharti Airtel and Vodafone Idea.

Quite similar to the dispute relating to AGR this particular dispute is also a long going one where the operators have obtained stay orders from various high courts or the Telecom Disputes Settlement and Appellate Tribunal (TDSAT). Still, every time there’s a merger, acquisition or trading of spectrum by any company the DoT raises the demand on the concerned operators as a result of which the matter again comes up in courts or TDSAT.

Appeal by the DoT in some cases are pending in the Supreme Court and in some in the planning stage.

The decision to levy OTSC was taken by the United Progressive Alliance government in the aftermath of the 122 2G licences given by the then telecom minister A Raja in January, 2008. The licences were cancelled in February 2012 by the Supreme Court but the furore it raised as these were given at 2001 rates of Rs 1,658 crore made the government decide to charge for spectrum given to the operators beyond the contracted amount through administrative orders.

Prior to 2010 operators got 4.4 Mhz spectrum bundled with licences and subsequent tranches came on achieving certain subscriber levels. The government had contended that it was contractually bound to give only 4.4 Mhz which came bundled with the licences and is free to charge for additional amount allocated. Around that time most operators held either 6.2 Mhz or beyond, even 10 Mhz. The operators had opposed the move by the government to charge for excess spectrum stating that since they paid higher spectrum usage charge for spectrum beyond 6.2 Mhz so any OTSC was not legitimate. However, this was discarded by the government, which raised the demand.

On July 4 on an appeal of Vodafone Idea, which merged in August 2018., the TDSAT had ruled in this matter that the DoT can only charge for administratively allocated spectrum to these firms beyond 6.2 Mhz and not 4.4 Mhz.

The telecom tribunal had said in its order that this levy cannot be charged from a retrospective basis, that is 1.7.2008, when a decision to this effect was taken by the government but can charge only prospectively, that is 1.1.2013, the date on which the government notified this decision.

In the said order, the TDSAT had discarded the arguments of both the sides. It said that operators cannot claim that they are not liable to pay anything as OTSC and government is wrong to say that only 4.4 Mhz was contract bound. “Demands for OTSC on spectrum allotted beyond start-up spectrum and up to the contracted limit of 6.2 MHz are not sustainable and are accordingly set aside,” the tribunal had said in its 36-page order. “In case of spectrum beyond 6.2 Mhz and allocated before 1.7.2008, respondent (DoT) can levy OTSC demand only prospectively, i.e with effect from 1.1.2013,” it added.

On why retrospective demand is unsustainable, the TDSAT explained, “Keeping in view the requirement of natural justice, levy of any such demand has to be accompanied with an option to surrender the allotted spectrum. However, we notice that the demand notice is given in 2012 to be effective from 2008, but option to surrender is from 2012 and not from 2008. Exercising the choice of surrender with effect from 2008 actually will be an impossibility, since no notice for charging OTSC was given to the petitioner in 2008. Therefore, retrospectivity of demand in this case cannot be held to be sustainable. However, levy of such demand prospectively suffers no such infirmity”.

The order is sure to be challenged by the DoT in the Supreme Court.―Financial Express

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