Telecom sector set to get back its ring

Nov 08 2013, 05:34 IST
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SummaryWith the Telecom Commission broadly endorsing the Trai base price and with a sensible M&A policy in place, the stage is set for successful spectrum auctions in January

With the Telecom Commission approving the reserve price, will the forthcoming auctions in January be successful?

The Telecom Commission has broadly gone along the recommendations of the Telecom Regulatory Authority of India (Trai) while approving the reserve price for auctions in 1,800 MHz and 900 MHz spectrum bands. The increase in the base price—18% for 1,800 MHz and 25% for 900 MHz—is not exactly an increase as the Commission has not done any fresh computation nor has it taken the calculations done by an expert committee of the department of telecommunications. What it has done is converted the value of spectrum for each circle computed by Trai as the base price. Trai had kept the reserve price at 80% of the value. Thus, the Commission has revised the prices upwards by 25% in the 1,800 MHz band in eight circles of Delhi, Mumbai, Kolkata, Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu. For the remaining 14 circles, the Commission has gone ahead with the Trai recommended prices. Due to a hike in base price in the eight circles, the pan-India per MHz price of spectrum has gone up by 18% to R1,763 crore against R1,496 crore recommended by Trai. Similarly, in the 900 MHz band, the Commission-recommended price stands at R359 crore for Delhi, R327 crore for Mumbai and R125 crore for Kolkata compared to R288 crore, R262 crore and R100 crore, respectively, proposed by Trai.

Though the industry is a bit disappointed with the increase as it would have liked the Telecom Commission to stick to Trai’s reserve price rather than the value of the spectrum, still the change is not that drastic that it would keep it away from the auctions as it did in March 2013. The prices endorsed by the Commission are around 50% lower than prices fixed during March auctions as against 60% cut recommended by Trai.

Are there any other factors, apart from the reserve price, which would impact auctions?

Yes, and that’s the spectrum usage charge (SUC), where the Telecom Commission has not endorsed the uniform SUC of 3% for spectrum bought through auction and a cap of 5% for those allotted administratively. However, it has, in-principle, accepted its relevance and significance. After discussions with the finance ministry a decision on the same would be announced. If the decision to move towards a uniform SUC is taken before the auctions, it would see good participation in the

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