Vodafone offers govt Rs4,000 crore to retain its spectrum

Vodafone India, an arm of the UK's Vodafone Group Plc, has made an unsolicited offer to pay the government Rs4,000 crore ($680 million) to keep its spectrum in the telecom circles of Delhi, Mumbai, and Kolkata for the next 20 years, after its earlier request in this regard was denied.

The company's licenses to offer services in the three lucrative service areas are due to expire in November 2014. Vodafone, the nation's second-largest telecom operator, wrote to the telecom secretary on 18 June to pay Rs4,000 crore for the extension of its operating licence.

"For extension of our licence for 20 years, along with current mix of spectrum and flat spectrum usage charge of 3 per cent AGR (Ajusted Gross Revenue), we are willing to pay Rs4,000 crore," it wrote.

The offer to pay for an extension is based on the company's own calculations. It said in its letter to the telecom department – details of which have only emerged today – that the price could also be applied toward a future auction of bandwidth in the three service areas.

Vodafone India had originally applied to have the permits extended late last year, but the Department of Telecommunications (DoT) rejected its application earlier this year, citing a change in the policy governing the licensing regime.

The company challenged the rejection at the Delhi High Court, which is scheduled to hear the case on 29 August.

"We reiterate that we are willing to discuss this issue further so as to arrive at mutually agreed terms and conditions for extension as provided under our license and as it is also desirable for continuity of service and public interest," the company wrote in its letter.

Officials in the DoT were unavailable for comment either to The Wall Street Journal, which has access to the letter, or to other publications.

India is the fastest-growing market for telecom services, but policy flip-flops have taken the shine out of the sector and hurt the profitability of companies.

Reports suggest that Vodafone's latest request is likely to be denied, as the government hopes to garner more money by auctioning the spectrum in bidding scheduled for this fiscal year.

Vodafone's proposal had been sent to an 'empowered' group of ministers, headed by finance minister P Chidambaram, at its last meeting on 26 June.

The EGoM has referred matter of spectrum pricing back to Telecom Regulatory Authority of India for fresh recommendation for the 'third round' of spectrum auction.