The Hindu Business Line : Govt plans spectrum transfer fee

New Delhi, Feb. 15 With mobile companies in the country getting high valuations, the Government is looking to rake in its share before allowing any mergers or acquisitions in the sector.

The Department of Telecom has proposed to introduce a spectrum transfer fee every time M&A happens in the wireless segment. This means that a company which sells or merges its cellular service business with another entity will have to first give a fee to the Government before it can complete the deal. This is similar to the registration fees paid to the Government while buying property.

The fee, according to the DoT, is on account of transferring the spectrum allocated to the cellular company to the merged entity. The exact quantum of the fee will be determined in consultation with the Telecom Regulatory Authority of India.

Last year, UK based Vodafone had acquired Hutchison Telecommunication’s stake in Hutch Essar for an enterprise value of nearly $19 billion. DoT sources said that while private companies are raking in huge amounts of money by selling and buying businesses which uses a public resource such as spectrum, the Government was not benefiting out of such deals.

DoT stand

DoT officials also point out that the private companies are benefiting from the Government’s policy to allocate spectrum at subsidised charges instead of market-driven value and therefore it was justified that they be asked to give a percentage of the revenue they get from M&A deals.

“With at least 5 more new operators planning to enter the cellular services segment, we expect consolidation to take place in the industry in the future. Spectrum transfer fee is being proposed so that the Government’s revenue targets are also taken care of even as private companies earn huge profits from M&A deals,” said a DoT official.

Industry not happy

The industry, however, is not too happy with the proposal. GSM industry sources said that the high valuations being received by mobile companies was due to the efficiency and value created by the promoting companies.

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