TRAI has seconded DoT’s line for increasing spectrum charges by 1-2% of AGR across the various bands. TRAI has recommended that the higher % of AGR would be based on only the 2G spectrum held even for those holding 2G+3G (post auction).

The move will impact GSM incumbents’ margins by ~1.5% though gets largely offset by DoT’s recent decision to reduce USO levy by 2% for operators reaching 95% coverage (effective April-09). Bharti Airtel, with widest coverage, could benefit almost immediately while other operators will gain in a phased manner.

TRAI has further proposed a fixed annual levy (@2% of the winning 3G bid) as admin charge. This is not likely to have any significant impact given that operators will factor it in the upfront 3G bid amount. This will reduce the bid amount by ~10-12%.