Indian New SUC Rule — An Incentive to acquire more 5G spectrum

Yesterday the Department of Telecom (DoT) came out with the new SUC (Spectrum Usage Charge Guidelines). As predicted earlier in my note dated 22nd Sept 2021 titled — “Telecom Reforms — No SUC for future spectrum, but will it reduce outflows?”, the DoT has done away with the floor of 3%. The purpose of this note is to estimate which operator will gain the most as they end up acquiring spectrum in forthcoming auctions.

Bharti

As of date, Bharti has 2 x 48 MHz of spectrum on a Pan India basis. The aggregation has been done on the basis of the subproduct of the individual circle weights based on the circle’s AGR share to the Pan India total, averaged for the last 4 quarters. For example, if the Pan India AGR is 100, and AP’s share is 7, then the corresponding weight attached to AP will be 0.07.

Using the same approach, Bharti’s Pan India SUC is 3.61%. Now let us assume that Bharti ends up acquiring 100 MHz of TDD spectrum in the 3.5 GHz band (2x50 MHz FDD equivalent), then the overall SUC for Bharti will get pulled down to 1.76% — A gain of 1.85%.

VodafoneIdea

As of date, VodafoneIdea has 2 x 40 MHz of spectrum on a Pan India basis.

Using the same approach, VodafoneIdea’s Pan India SUC is 4.22%. Now let us assume that VodafoneIdea ends up acquiring 100 MHz of TDD spectrum in the 3.5 GHz band (2x50 MHz FDD equivalent), then the overall SUC for VodafoneIdea will get pulled down to 1.87% — A gain of 2.35%.

RJIO

As of date, RJIO has 2x 39 MHz of spectrum on a Pan India basis.

Using the same approach, RJIO’s Pan India SUC is 2.8%. Now let us assume that RJIO ends up acquiring 100 MHz of TDD spectrum in the 3.5 GHz band (2x50 MHz FDD equivalent), then the overall SUC for RJIO will get pulled down to 1.23% — A gain of 1.57%.

Conclusion

With the change in SUC rules, it is now in the interest of the operators to acquire as much 5G spectrum as possible. For example, if they end up acquiring an additional 400 MHz spectrum in the 26/28 GHz band (2x200 MHz FDD equivalent), then the overall SUC for all the three players will get pulled down to — 0.57% Bharti, 0.58% VodafoneIdea, & 0.37% RJIO. Thus making SUC totally irreverent. A great outcome for all the operators.

(Views expressed are of my own and do not reflect that of my employer)

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