Telenor Wants 'Pay as You Earn' Payment Terms for Spectrum

Telenor Wants 'Pay as You Earn' Payment Terms for Spectrum
Telecom operator Telenor has asked the Department of Telecom (DoT) to retain the option of deferred payment suggested by the regulator Trai, saying it would help reduce the burden on the industry.

"The 'pay as you earn' payment terms is a win-win situation both for the industry and the government," the operator, an arm of Norway-based Telenor, has said in a letter to DoT.

The communication has come days after Norway-based

Telenor's top management expressed concerns over 'high-priced' spectrum in India and indicated an exit from the country if it fails to procure frequencies at reasonable price either through auction or trading route.

(Also see:  Tech 101: What Is Spectrum, and Why Is It Being Auctioned?)

On the one hand the payment burden on the TSPs (telecom service providers) is eased in the initial years and the resources will be utilised in roll-out of the networks, on the other hand there will be no loss to the exchequer," Telenor CEO Sharad Mehrotra said in the letter.

The letter addressed to Telecom Secretary J S Deepak said that the liberal payment policy can potentially make the frequency band below 1000MHz like 900MHz band and 700MHz band attractive to a lot of telecom companies.

Trai has suggested that government should charge only 10 percent of bids received for spectrum and balance payment should be made over period of 18 years in equal instalments with interest.

(Also see:  The History of Telecom Spectrum in India: The 900MHz Auctions)

"We earnestly urge the Telecom Commission to accept the Trai's recommendation of liberal payment terms and notify for the forthcoming auction," Mehrotra said.

Trai has suggested a mega-spectrum auction plan that has potential to fetch government bids worth Rs. 5.36 lakh crore.

The total recommended reserve price of Rs. 5.36 lakh crore for spectrum auction is almost double the cost of all spectrum investment to date in India and more than double the total gross revenues of Rs. 2.54 lakh crore posted by all telecom service providers in 2014-15 financial year.

Norway-based Telenor's top management has indicated exit from India if the company fails to procure spectrum at reasonable price either through auction or trading route.

Telenor Chief Financial Officer Morten Karlsen Sorby has called current spectrum prices in the market as 'absurd'.

The company, which accounts for about 6000 direct and indirect jobs in the country, has already made impairment provision in its financial books for Telenor India.

After impairment of network equipment (Rs. 1,092 crore) and spectrum (about Rs. 700 crore), Telenor expects recoverable amount of its assets in India to be around Rs. 3,500 crore (NOK 4.5 billion).

As per GSMA, the Trai-recommended base price equates to more than 20 times the annual free cash flow of the entire mobile industry in India.


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