Telecom back to reform mode with base price cut

Sep 10 2013, 03:19 IST
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SummaryMandatory auction, uniform usage fee & spectrum trade on cards

Underlining the deterioration in all the key macro-economic indicators and two flop auctions in the past, the Telecom Regulatory Authority of India (Trai) on Monday recommended a reduction in the base price of spectrum by up to 60%. The regulator also suggested a couple of major policy changes, including allowing spectrum trading and a flat spectrum usage charge to clear the mess in the telecom sector. The suggestions will now be vetted by the empowered group of ministers headed by finance minister P Chidambaram before the government decides on the final reserve price and date of the proposed auctions, which it needs to hold as per the directions of the Supreme Court.

Though none of the operators officially commented on the recommendations, privately, their officials broadly welcomed the suggestions as well thought-out and a step in the right direction.

Apart from the reserve price, the other significant recommendation is there would be no more reservation of spectrum for any class of operators and all spectrum would have to be bought from the market by participating in the auctions. This means operators like Bharti and Vodafone would not have any automatic right on the spectrum held by them in the more efficient band of 900 MHz when their licences in some circles come up for renewal in November 2014. Also, these operators would not be given spectrum in the 1,800 MHz in lieu of the 900 MHz as was earlier accepted by the government.

In the 1,800 (2G) MHz band, the price suggested by Trai for per MHz spectrum on a pan-India basis is down 37% at Rs 1,496 crore compared to Rs 2,378 crore in the March auctions, which did not find any takers. For a block of 5 MHz spectrum, the minimum required by any new operator to provide services, the pan-India price comes to Rs 7,480 crore against Rs 11,890 crore fixed during the March auctions.

The decrease in base price in the 900 MHz band is higher at 60%. Here, in November 2014, the licences of Bharti in Delhi and Kolkata and those of Vodafone in Delhi, Mumbai and Kolkata would come up for renewal. The price of per MHz spectrum in Delhi has been suggested at Rs 288 crore, down 63% from the price of Rs 776 crore recommended in March. Similarly, the price for Mumbai circle is lower by 65% at Rs 262 crore against Rs 760 crore

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