Tower Spectrum Usage Fees for Indian Mobile Operators

source: The Economist

Taxes are a significant part of the cost side of the business model for most businesses, including Indian mobile operators, who historically have paid a five percent spectrum usage fee for use of spectrum, in addition to paying for spectrum licenses that confer no perpetual property right.

So it ought to be helpful that India’s Department of Telecommunications has lowered annual spectrum usage charges from five percent of revenue to three percent of for all spectrum acquired in the upcoming auction.

A lower one-percent charge is applied to 4G spectrum purchased by carriers in 2010 auctions.

The rule change could mean either higher profit margins or more ability to spend on spectrum.

Such changes potentially are helpful for ISPs seeking to expand Internet usage by consumers who cannot afford to pay very much, as lower operating costs allow for lower retail prices, all other inputs held constant.

In recent quarters, dwindling cash flow has been a concern within the industry. Also, firms now will be investing lots of capital in upcoming spectrum purchases as well.

Low profits have been an industry-wide problem for some years.