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Licence Fees

Contents

Introduction

The ICTA Guideline Document, Licence Fees for Long-Term Licensees (GD1), provides ICT Network operators and ICT Service providers licensed by the ICT Authority ("Authority") with guidelines on the procedures to be used for the calculation and payment of licence fees by Licensees of major public ICT Networks and ICT Services as listed in the Authority's recent Section 23(2) Notice.

 

These procedures are subject to amendment and updating and any changes will be notified to ICT Licensees and republished on the Authority's web site.

 

The information in the document and on this web page should not be considered to represent legal or commercial advice and readers should seek appropriate professional advice appropriate to their own circumstances. The document and this web page are without prejudice to the legal position or the rights and duties of the Authority to regulate the market generally. Any views expressed are without prejudice to the final form and content of any decisions the Authority may issue.

 

Who is liable to pay Licence Fees?

Cable & Wireless' licence refers to the revenues to be used for the calculation of the regulatory fee as ICT Sector One which was defined as “… all those activities identified as Types 1, 2, 3, 4, 5, and 9 (limited to Internet Service Providers) ICT Services, as set out in the first Section 23(2) Notice i issued by the Authority, as a minimum, and such others as the Authority may prescribe from time to time.” By this Guidelines document, the Authority redefines ICT Sector One to mean all those activities identified as ICT Networks and ICT Services as set out in the most recent Section 23(2) Notice.

 

How will Licence Fees be calculated?

The licence fees will be calculated and paid in arrears on a quarterly basis with an annual true up mechanism based on the Licensee's annual audited financial statements.

 

For each Licensee, licence fees will be comprised of a royalty fee and a regulatory fee.

 

The royalty fee, which is set by the Government, will be 6% of each Licensee's revenues. The regulatory fee, which is based on the Authority's costs for regulating ICT Sector One, will be pro-rated across all Licensees based on each Licensee's quarterly revenues as a percentage of all Licensees' quarterly revenues. Both components of the licence fee will be remitted by Licensees on quarterly to the Authority.

 

The Authority will use Licensees' revenues for the quarter immediately preceding the quarter for which licence fees are due for purposes of calculating each Licensee's regulatory fee. In part, the reason for this is because of the time it will take for the Authority to calculate the regulatory fee payable by each Licensee which can only be done after all Licensees provide their revenues. Given that Licensees' revenues will only be available some time after the end of the last month of each quarter, the Authority is concerned that using revenues for the immediately preceding quarter would result in undue delays in calculating and collecting regulatory fees. Hence, the Authority has decided to use revenues for the quarter prior to the immediately preceding quarter to calculate each Licensee's regulatory fee.

 

The quarterly licence fee therefore will comprise of:
  1. a royalty fee to be calculated as 6% of the Licensee's quarterly revenues; and
  2. a regulatory fee to be calculated based on the Authority’s quarterly on going expenditures for the regulation of ICT Networks and ICT Services multiplied by the Licensee’s revenues for the quarter immediately preceding the quarter for which licence fees are due, divided by all Licensees’ revenues for the same quarter.

The regulatory fee to be paid by each Licensee during the Authority's financial year (i.e., 1 July to 30 June) shall not exceed six hundred thousand dollars.

 

When the results for a Licensee’s financial year are finalised and it transpires that the audited revenues are higher than the sum of the unaudited quarterly revenues, which were used to calculate licence fees during the year, the Licensee will be liable for an additional royalty fee equal to 6% of the difference between the audited revenues and the sum of its unaudited quarterly revenues. This will be payable forthwith upon submission of the Licensee’s annual audited financial statements, which are due no later than three months after the end of its financial year. If, on the other hand, the Licensee’s audited revenues are lower than the sum of its unaudited revenues, the Authority will calculate and apply an equivalent credit to the Licensee’s royalty fee for the current year. In either case, the Authority does not anticipate collecting additional regulatory fees.

 

What constitutes Revenues for Licence Fee purposes?

Revenues for purposes of calculating the royalty fee and the regulatory fee are defined as:

 

The total amount of receipts in money or money’s worth received by the Licensee from all sources arising out of or in connection with the Licensee’s business in or from the Cayman Islands for a defined period of time (e.g., monthly, quarterly or annually, as the case may be).

 

Less

 

  • Payments made to other ICT Licensees for interconnection, infrastructure or wholesale services for that same period; and
  • Settlement payments made to international carriers for international traffic, including adjustments to payments for such traffic for that same period. If any of the payments are made to a Licensee’s affiliate, the amount deducted for purposes of calculating revenues will be only to the extent that those payments are made at open market value on an arm’s-length basis; and
  • Non-recurring extra-ordinary items of receipt (including real estate) that are not made in the ordinary course of business.

While the definition of revenues in the licence uses the words "money or money's worth received", the Information and Communications Technology Authority Law (Determination of Turnover) Order, 2004, for the purposes of then section 34Q(8) of the ICTA Law, defined "turnover" to mean the total amount of receipts in money or money's worth earned by a licensee. The Authority uses that definition for licence fee purposes and therefore, for the purposes of calculating the royalty fee and the regulatory fee, Licensees are to report based on money or money's worth earned.

 

A Licensee must report its quarterly turnover and quarterly revenues in a licence fee report, the format of which is attached as Schedule 1 to the Guidelines document.

 

Other Matters

The above is merely a summary of Guidelines Document GD1 which should be read by all Licensees and potential Licensees.