RCom asked to pay up Rs 5,384 crore spectrum fee

DoT had raised the demand on December 22 and asked RCom to pay within a month.

The department of telecommunications (DoT) has asked Reliance Communications (RCom) to pay Rs 5,384 crore (Rs 53.84 billion) for sharing its 800 MHz spectrum in 16 circles.

The spectrum liberalisation fee would apply to all circles where airwaves weren’t sold via auctions.

Sources familiar with the developments said the company had also been asked to pay a one-time spectrum usage charge of Rs 1,596 crore (Rs 15.96 billion).

The DoT had raised the demands on December 22 and asked RCom to pay within a month.

RCom plans to share or trade spectrum with Mukesh Ambani’s Reliance Jio for the launch of 4G services.

RJio holds 2,300 MHz in all circles, 1,800 MHz in 18 circles and 850 MHz in 10 circles.

The 800 MHz band offers good coverage indoors and provides seamless voice services through VoLTE, which is why the deal is critical for launch of full-fledged 4G services.

RCom stocks were down by 4.18 per cent and closed at Rs 80.25 on the BSE. 

According to market sources, RJio may step in to help out RCom, which has huge debt on its books.

This will be the second such deal after Idea Cellular announced buying of spectrum from Videocon in two circles for Rs 3,310 crore (Rs 33.10 billion).

RCom and Sistema Shyam Teleservices have agreed on a merger, which will provide the former access to liberalised 800 MHz spectrum in eight circles and yet to be liberalised spectrum in one circle. 

RCom is also in talks with Aircel for a possible merger of their wireless business.

Aircel has 2G spectrum in 19 circles, excluding Kolkata, Delhi, Mumbai and Chennai; 3G spectrum in 13 circles; and 4G spectrum in eight circles.

RCom had applied for liberalising its 800 MHz spectrum in 20 circles a few months ago.

The company is yet to receive any notice for the remaining four circles where market determined prices are not available. The four circles are Kerala, Karnataka, Rajasthan and Tamil Nadu, where the DoT has sought the telecom regulator's views.

To liberalise administratively allotted spectrum, telecom companies need to pay the market determined price for the remaining period of the licence. RCom was sitting on a debt of Rs 39,800 crore (Rs 398 billion) at the end of September, which it plans to bring down to Rs 20,000 crore after selling its cellular tower-related infrastructure.

According to market sources, the liberalisation amount will be paid by RJio.

The company will submit a bank guarantee equal to the one-time spectrum usage charge of Rs 1,596 crore as the matter is sub-judice.

Recently, Reliance Group Chairman Anil Ambani had announced RCom would share spectrum with RJio for 4G services.

Addressing the company's annual general meeting last year, Ambani had said both the companies were at an advanced stage of discussions for finalising a nationwide spectrum trading and sharing arrangement.

The government has issued rules to liberalise the administratively allotted 2G spectrum, allowing operators to offer latest mobile services, including 4G, using the same radiowaves.

The spectrum will be liberalised for the remaining period of the licence held by the telecom operator. The telecom operator will have to pay the auction determined price.

In case the auction price is more than one year old then the prevailing market rate will be determined by indexing the last auction price at State Bank of India's prime lending rate.

Get on the bandwidth

RCom to pay Rs 5,384 cr  for liberalising its 800 MHz spectrum in 16 circles 

One-time spectrum usage charges of Rs 1,596 cr will be given as bank guarantee

RJio has 800 MHz spectrum in 10 circles

RCom-MTS have agreed to a merger; MTS also holds liberalised 800 MHz in eight circles

RJio planning to launch commercial operations by April

Spectrum Analysis

A telecom operator needs to pay market-determined price for liberalising spectrum, which was allotted administratively earlier

Liberalisation means a telco can use the spectrum for any technology, irrespective of frequency