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Clarity emerges on Spectrum Usage Fees
- Empowered Group of Minister came up with the new fee structure on spectrum charges clearing the clouds of uncertainty which prevailed over last few months. This is a clear positive in itself as clarity and stability of government policies is must for telecom operators to formulate their policies particularity pricing and bidding actions.
- As per the new rules operators will have to pay a flat 5% fee for the new spectrum to be auctioned in February 2014.
- This is better than 6-8% fees which the incumbent telecom players - Bharti, Vodafone and Idea - would had to pay under the existing norms and that too on entire - old plus new - spectrum.
- However, 5% rate is higher than the expectations of 3% rate for the entire spectrum which many of the market participants had expected and hence the telecom stocks seems to have taken beating in the market.
- Also, another negative for existing telecom players is spectrum fees for data by Mukesh Amabni's Reliance Jio has been kept unchanged at 1% which continues to provide unfair advantage to RIL group company.
- Though not entirely as per the expectations, we believe the clarity over the spectrum pricing is more important than the vague policies. The one obstacle is now out of the way and all eyjpouopijs are now set on Auction. We hope rationality prevails over bidding by incumbents as any aggression from their side is not only futile but will be damaging for their own. All the indications from Reliance Jio point that they are not interested in price war this time and hence any move to instigate them will only be counter productive for the incumbents.
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