Telecom Commission has taken some decisions on spectrum usage charges (SUC) paid by the industry. SUC is a recurring charge paid as a % of the net revenues of each operator. SUC today is a mix of slab-based charges (on old spectrum) and flat charges (on new auctioned spectrum).
Today's decision has two parts to it, one prospective and the other retrospective. The prospective decision concerns the upcoming auctions. All spectrum purchased in the auctions will attract a flat 3% SUC (this is down from 5% in the previous auctions). We see this having no impact by itself ? the reduced recurring SUC will get offset by a higher upfront bid in the auctions ? with no NPV impact (we have not built any new spectrum purchase in our models).
The retrospective decision has some interesting consequences. The TC has decided that operators will move to a blended SUC which is weighted by the average spectrum holding in each of the spectrum buckets. The new information here is that the weighted average will include the 2300MHz spectrum (auctioned in 2010, currently charged separately at 1% SUC). This rule is relevant only for holders of this spectrum, i.e., Bharti and RJio. This mathematically has the effect of reducing the blended SUC since 2300MHz is charged lower.
The math for Reliance Jio is not clear since we do not have full details of how RCOM's spectrum will be shared/traded. But we believe the eventual blended SUC would be the lowest in the industry at ~3% of net revenues.
