India approves $5.7 billion mobile airwave surcharge

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By Devidutta Tripathy and Nigam Prusty | November 8, 2012 5:42 PM EST

India's federal cabinet approved a plan to levy a $5.7 billion (3.57 billion British pounds) surcharge on airwaves held by long-established telecommunications operators that will hit market leaders Bharti Airtel and Vodafone's local unit and two state-run carriers the most.

A ministerial panel had proposed to the federal cabinet that GSM-based carriers be asked to pay for airwaves beyond 4.4 megahertz at an auction-determined price, while CDMA carriers pay for holdings beyond 2.5 megahertz, for the remaining validity of their permits.

On the top of that, it had also suggested that GSM-based carriers who have more than 6.2 MHz of airwaves should also pay a retroactive fee for the extra airwaves for the period between July 2008 and December this year.

The telecommunications minister has said the surcharges being proposed are aimed at creating a level playing field between old and new operators.

"Both GSM and CDMA would be charged, that is decided," said a government minister, who declined to be named, adding that the Department of Telecommunications would determine the basis for charging spectrum held by CDMA operators.

India, which traditionally bundled airwaves with telecom permits and charged just about $300 million for all India permits, is for the first time auctioning off second-generation airwaves after a scandal over a state grant process in 2008.

The telecommunications ministry had planned to hold two separate auctions for airwaves used by GSM and CDMA-based mobile phone carriers hoping to reap a combined 400 billion rupees ($7.4 billion) to plug a high fiscal deficit.

The government has set a base price of 140 billion rupees for 5 mega hertz of GSM airwaves in all the 22 zones, more than seven times what companies paid in the 2008 grant process. The base price of CDMA airwaves had been set 1.3 times the GSM airwaves.

But India has been left with no bidders for the CDMA part of the auction after Tata Teleservices and Videocon Telecommunications dropped out of the sale.

($1 = 0.63 British pounds)

(Reporting by Nigam Prusty and Devidutta Tripathy; Editing by Matt Driskill)

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