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* Bharti, Vodafone to gain from lower spectrum fee
* Smaller carriers stand to pay more
* Telecom minister says move to boost auction results
* Government faces revenue loss with new rate
* Mobile phone spectrum auction starts Feb. 3
By Devidutta Tripathy
NEW DELHI, Jan 27 (Reuters) - Telecommunication companiesbuying airwaves in an Indian auction next month will pay 5percent of their revenue as an annual fee, a ministerial paneldecided on Monday, a move that means lower payments for biggercarriers Bharti Airtel and the Indian unit of Vodafone.
The move scraps the 3-8 percent fee range the countrycurrently levies in an effort to coax previously reluctantoperators into taking part in India's third attempt atauctioning two frequency bands for billions of dollars.
The new rate is higher than the 3 percent flat ratesuggested by an independent sector regulator, which had proposedabolishing the current levy of five different rates depending onthe quantum of spectrum held by a carrier.
The government may lose some revenue it collects as annualfees due to the new rate, Telecommunications Minister KapilSibal said after the meeting of the ministerial group, butexpects it to help companies buy more spectrum in the auctionstarting Feb. 3.
"No big losers, no big winners," Sibal said. "A successfulauction means greater investment in the sector," he said,explaining the rationale for the new rate.
After two previous attempts to pull off the sale wereboycotted by major mobile phone operators that complainedminimum bid prices were too high, India cut sharply the floorbid price for the February auction, helping it lure interestfrom eight carriers including the market leaders.
That still did not guarantee a successful sale as carriersincluding Bharti and Vodafone demanded a cut in the recurringannual fee they pay on the top of the winning bid price forusing airwaves. India expects to raise at least $1.8 billionthis year from the spectrum auction.
"I think it's a mixed blessing. We are pleased that it'scapped at 5 percent," said Rajan Mathews, director general atthe Cellular Operators' Association of India after theministerial panel's decision on Monday.
Bharti and Vodafone must buy spectrum in the Februaryauction to renew their permits in some key cities and areexpected to benefit from the 5 percent cap because theycurrently pay around 6 percent of their revenue in annual feesin those markets.
But smaller carriers that pay less than 5 percent currently,will tend to move towards the 5 percent rate gradually if theybuy more spectrum from the auction, Mathews said.
The total spectrum fee for carriers' existing spectrum andnew spectrum from the February auction will be calculated basedon a weighted average of the old and new fee, Sibal said.
Sibal said companies like Reliance Industries Ltd,which bought 4G spectrum in a 2010 auction, will continue to pay1 percent of their revenue as annual fee for that spectrum.Reliance, which is also bidding in the February auction, hadopposed any change in the fee for 4G spectrum.
