The government is set to waive Spectrum Usage Charge (SUC) for airwaves acquired through auctions before September 2021, providing telecom operators with relief worth thousands of crores. The decision is expected to help Vodafone Idea, Bharti Airtel, and Reliance Jio conserve cash as they expand 5G services and strengthen their networks, an official source told The Times of India.
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In June 2022, the government decided to eliminate the SUC for bandwidth auctioned after September 15, 2021, across various frequencies. However, no decision was made regarding the spectrum acquired in auctions before this period, according to the report.
"The move to waive off SUC for spectrum bought through auctions before 2022 is likely to be approved soon. The plan is to give relief to the telecom companies so that their network expansion work continues strongly," the report quoted a source as saying.
Relief Amid Financial Stress
Currently, telecom operators pay SUC at 3–4 percent of their adjusted gross revenue (AGR), along with an 8 percent license fee, which includes a 5 percent contribution to the Universal Service Obligation Fund (USOF).
Officials felt that a competitive bidding process, which went aggressive on many occasions, had already helped the exchequer get the best prices for airwaves and thus there was no need to tax companies more for spectrum.
"The matter has already been discussed within DoT and relevant ministries and an announcement on the waiver can come soon," the source reportedly said.
Vodafone Idea, struggling under a debt burden of over Rs 2 lakh crore, is expected to be one of the biggest beneficiaries, with estimated savings of around Rs 8,000 crore.
"It is believed that the company [Vodafone Idea] may get a benefit of around Rs 8,000 crore," the source reportedly said.
However, the company continues to face financial challenges and has recently urged the DoT to convert its pending AGR and spectrum dues from the 2012–2016 auctions into government equity. If approved, this move would increase the government’s stake in Vodafone Idea from 22.6 percent to 49 percent.
Also Read: Vodafone Idea Seeks Further Government Support Amid AGR Dues Pressure: Report
Starlink to Pay SUC
The waiver also comes at a time when the local companies are preparing for the entry of Elon Musk in the telecom sector through Starlink's Rs 2-lakh-crore venture. Interestingly, while local companies will see SUC obligations being waived off completely, Starlink will be required to pay tax on its spectrum, the source reportedly said.
"The reason for Starlink and other satellite operators being asked for SUC is that they will get the spectrum on an administrative basis instead of competitive auctions. The thinking is clear that any company getting spectrum through govt allocation at a pre-determined price will need to pay tax on the spectrum," the source explained, according to the report.
