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EGoM to decide spectrum price: Telecom commission

New Delhi: The telecom commission, in its second meeting on Saturday, failed to arrive at a decision on the reserve price for the forthcoming 2G spectrum auctions and left the final decision on the empowered group of ministers headed by finance minister Pranab Mukherjee. However, for the ease of the EGoM to come to a final conclusion, it decided to refer the matter back to the Telecom Regulatory Authority of India (Trai) to carry out the analysis of the reserve price and its impact on consumer tariffs, health of the telecom companies and government revenue.

The analysis by the Trai is expected by the end of May, which would be forwarded to the EGoM for a final decision. The EGoM is expected to meet in the first week of June. “The commission took note of the reserve price that Trai has recommended and it felt that an analysis needs to be made on the impact of spectrum price on certain parameters that have been worked out and presented to EGoM,” telecom commission chairman and DoT secretary R Chandrasekhar said. As is known, the Trai has suggested a reserve price of R18,110 crore for a block of 5 Mhz spectrum in the 1,800 Mhz band (GSM services).

Chandrasekhar said the Trai would now be asked to analyse the impact of this reserve price on three parameters. The first would be impact on tariff if operators pass on the high reserve price in the form of tariffs. The second is impact on the state of health of companies if operators absorb the impact, and finally, the impact on government revenues. In short, the analysis would focus on balancing the interests of the consumer, industry and government.

There has been a huge debate between the Trai and the industry ever since the high reserve price was announced. While the regulator maintained that it would merely lead to a tariff hike of some 4 paise, operators contested that it could be as high as 30-90 paise depending upon the circles. The operators had maintained that the reserve price is not aligned to market realities and availability of spectrum and would sound a death knell for the industry.

Another important matter on which the commission has sought the regulator’s view is that while keeping the current reserve price where the allocation of spectrum is for a 20-year period, price fixation be done for only a 10-year period. “This would mean that operators need to pay on a pro-rata basis and their upfront payment would reduce,” said Chandrasekhar. The commission has rejected the Trai’s views that operators only pay 33% of the price upfront and after a two-year moratorium pay the balance over a 10-year period. The commission has accepted the suggestion of allowing operators to mortgage spectrum to raise funds, but modalities need to be worked out. The spectrum usage charge would be 3% of the adjusted gross revenue of the operators.

However, barring the pricing, the commission has by now taken a decision on most other matters. For instance, it decided on Saturday that the reserve price of spectrum in the 800 Mhz band (CDMA services) would be twice that of the 1,800 Mhz (GSM services) and not 1.3 times as the Trai had suggested.

However, a further analysis on the matter between what the Trai suggested and DoT committee said would be done. While accepting liberalisation of spectrum, meaning that 2G spectrum can be used for 4G services and vice versa, the commission has asked Trai to suggest what should be the amount existing operators pay on a pro-rata basis if they chose to make their existing spectrum for liberalised use for the balance period of their licence.

In its last meeting on Thursday, the commission had decided on the number of slots that would be up for auctions. It had provided for two options: one, that a minimum of 10 Mhz spectrum be auctioned in all the circles with a provision of topping up so that a new operator is able to get a minimum of 5 Mhz. The other option is that after provisioning for re-farming of 900 Mhz spectrum from the existing operators, all the balance remaining in the 1,800 Mhz be auctioned.

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Posted by on May 27 2012. Filed under Technology News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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