![\"\"](\"\/\/www.iser-br.com\/Themes\/Release\/images\/responsive\/ettelecom-default.jpg\")
Analysts expect the move to drive stronger telco participation in the upcoming 5G spectrum<\/a> sale as operators would enjoy sizable annual savings on SUC, especially if they bid strongly for low-cost 26 GHz mmWave airwaves.
“The weighted average (of SUC) is to be derived by the sum of the product of spectrum holdings and applicable SUC rate, divided by (a telco’s ) total spectrum holding,” DoT said in an order, dated June 21, on SUC computations.
A senior telco executive told ET that unlike earlier SUC computation orders, “there is no mention of the 3% floor rate this time, implying it has been removed”.
SP Kochhar, director general of Cellular Operators Association of India (COAI), said, “The much-awaited DoT order regarding levy of SUC for airwaves will provide clarity to telecom service providers for the upcoming auctions.”
The COAI represents Reliance Jio, Bharti Airtel and Vi.
Operators recently told the DoT that merely scrapping SUC for airwaves bought in future spectrum auctions, starting with next month’s 5G<\/a> sale, would be meaningless if the SUC floor rate, equivalent to 3% of a telco’s adjusted gross revenue<\/a> (AGR<\/a>), remained.
They said abolishing SUC on airwaves bought in the July sale would not effectively cut telco payouts of these statutory fees as they still would have to shell out a minimum 3% of AGR, regardless of buying new spectrum attracting zero SUC in future sales.
The 3% floor had been fixed by DoT in 2016 to protect government revenue as the SUC at that time had been lowered to encourage telcos to participate strongly in that auction. But with the scrapping of the SUC floor, a telco’s total outflows toward spectrum charges could plunge well below 3% of AGR, especially if they buy large chunks of 5G airwaves.
Analysts expect operators to buy 400-500 units of low-priced 26 GHz mmWave spectrum, given its ample supply and since it won’t attract any SUC since 26 GHz is suitable for high-speed, low-latency applications, especially in crowded zones where large volumes of traffic have to be carried.
IIFL Securities said it saw “significant SUC savings in the offing for Jio, Airtel and Vi, estimating that they could see $3.7 billion, $3.4 billion and $1.2 billion EV (enterprise value) upside respectively by winning large quantities of the 26 GHz band spectrum”.
Under the auction rules, telcos pay SUC on a weighted average basis, depending on timing and quantity of airwaves held. The government has been reducing SUC over the years. So, if a carrier buys a high quantity of airwaves in the next auction, which attracts zero SUC, their overall payouts on this score could drop down to 1-2% of AGR, especially now with the removal of the 3% floor rate.