DoT removes need for a financial bank guarantee to cover for annual spectrum instalment; notifies other changes

The telecom department has removed the need for a financial bank guarantee to cover for annual spectrum installment as well as a performance bank guarantee for roll-out obligations, from future auctions. In a notice, it said it will accordingly change the eligibility conditions for participation in the next sale so that bidders have sufficient financial capacity.

“For spectrum auctions to be held in the future, the requirement for the successful bidder to submit a Financial Bank Guarantee (FBG) of an amount equal to one annual installment to scrutinize the installment; and to submit Performance Bank Guarantee (PBG) for rollout obligation, etc. has been dispensed with,” the telecom department said in a notification issued Tuesday.

It said it will accordingly change the eligibility conditions for participation in the next sale so that bidders have sufficient financial capacity.

The department has also sought the Telecom Regulatory Authority of India (TRAI)’s recommendations on upfront payment requirements, moratorium period, number of deferred payment installments, after extending the tenure of the right to use airwaves to 30 years from 20 years now. It added that auctions will be held in FYQ4 each year, but can be held at shorter intervals if needed.

Telcos have also been formally allowed to surrender spectrum after 10 years. But they will have to inform the department one year before surrendering. An “appropriate surrender fee” will be charged, however.

The telecom department added it has sought the sector regulator’s recommendations on the surrender conditions and the fee.

“For spectrum acquired in future auctions, no Spectrum Usage Charge (SUC) will be levied. The condition of a minimum 3% weighted average SUC rate and SUC floor amount will also be removed,” it said.

The department said it will release guidelines to operationalize its decision soon.

“In order to encourage spectrum sharing, for better utilization and efficiency, henceforth, spectrum sharing will not attract an increase of 0.5% in the SUC rate,” it said. Guidelines for the same will be issued shortly, DoT said.

These reforms are part of the broader telecom sector reforms, including nine big reforms and five process reforms introduced by the Union Cabinet on September 15 to keep the sector healthy.

The relief package rolled out by the Cabinet includes a moratorium with interest rates for four years, a change in the definition of contentious Adjusted Gross Revenues (AGR) to exclude non-telecom revenue, 100% FDI through automatic route, spectrum sharing, single-window RoW clearance for tower installation and digital KYC among others.

Other major measures include the option given to telcos for converting dues and interest into government equity, a drastic reduction in the requirement for bank guarantees, as well as a facility to surrender unused spectrum.