North Block asks DoT to justify spectrum charges

The finance ministry has joined the controversy over spectrum allocation to mobile service providers by asking the Department of Telecom (DoT) to justify why operators of CDMA technology services have been allowed to pay a price discovered in 2001 for spectrum to offer all-India GSM services.

In a letter sent to DoT last week, a senior ministry official said the Rs 1,650 crore did not reflect the current value of spectrum, the radio waves that enable wireless communications.

In a strong response, DoT has pointed out that many GSM operators including Vodafone, the fourth-largest mobile services provider, have been given as many as 23 fresh licenses based on the same pricing as recently as December 2006. In all, 50 licences have been issued between 2003 and 2006, most of them for GSM operations, at the same price.

Another 46 companies are currently lined up for new mobile licences including existing GSM operators. DoT has said the licences would be issued based on the same pricing norms, adding that there is no room to question the policy.

The letters come amidst a battle over the rules and procedures governing spectrum that has pitted the powerful GSM lobby against leading CDMA operator Reliance Communications, which recently paid Rs 1,650 crore to DoT for the right to "cross-over" and use GSM spectrum.

According to sources in the know, the finance ministry letter had also raised the question about why other ministries were not intimated or involved in fixing licence fees. The move comes even as the finance ministry's Department of Economic Affairs has suggested lowering taxes and levies on the telecom services sector.

The Rs 1,650 crore price tag for nationwide licences has prevailed since 2001, when it was set as the entry fee. In December 2003, the fourth GSM licence was issued at the same price.

Reliance Communications (then called Reliance Infocomm) was also charged a similar amount in 2004 as part of the package to convert its limited mobile licence to a unified access service operation.

Since then, the mobile subscriber base has gone up to well over 200 million now.

However, a key difference in telecom policy since then is that DoT last month decided to de-link the issue of spectrum from the licence and said it would issue licences without any guarantee of spectrum.