9:07 AM
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The Telecom Regulatory Authority of India (TRAI) on Monday proposed a higher-than-expected base price for the upcoming auction of 2G radio spectrum. The recommendations come after the Supreme Court in February ordered the cancellation of all telecoms licences awarded in 2008 and mandated fresh awards through open bidding.
The regulator has proposed Rs 3,622.18 crore as the base price for every megahertz of spectrum in the 1,800 mega hertz band, where radio airwaves will be made available after the cancellation of the licences. Were this to be accepted by the government, a new operator would have to cough up Rs 18,110 for a block of 5 Mhz spectrum. This is higher than the auction discovered price of Rs 16,750.58 crore for 5 Mhz 3G spectrum in 2.1 Ghz band.
In other words, the value of 1 Mhz 2G spectrum will turn out to be higher than 5 Mhz of 3G spectrum. This is well above the record set at the July 2010 3G auctions and is nearly 10 times the floor price at which former telecom minister A Raja had allocated spectrum and telecom licences to companies like Unitech Wireless and Swan in 2008.
The regulator also proposed that the auction should be open to all eligible carriers holding spectrum below a prescribed cap. The recommendations are not binding on the government, which has the final say on the auction modalities. Expectedly, telecom operators have strongly opposed the recommendations and asked the political leadership to ensure that the gains of telecom liberalisation are not undone.
In a joint statement, the two telecom industry bodies COAI and AUSPI said that the reccommendations translated into a reserve price of over Rs 18,100 crore for a block of 5MHz in the 1800 MHz band. Terming this as “arbitrary, regressive and inconsistent”, they said this was “detrimental” to the future of the sector. “The regulators actions appear to be unfair and biased against all operators for reasons best known to it.”
A majority of operators in their responses to the consultation paper issued earlier by Trai had suggested the reserve price for 1800 MHz to be fixed at Rs 1,658 crore — the price charged for a pan-India 2G licence in 2008. Existing operators such as Uninor, having already invested over Rs 14,000 crore, would now have to shell out a minimum of Rs 18,100 crore were it to bid for a pan-India licence in a fresh auction.
The scenario is no different for incumbent operators such as Bharti Airtel, Vodafone and Idea Cellular. They may not participate in the auctions, but when their licences come up for renewal between 2013 and 2015, they will have to fork out the auction prices for their existing spectrum, which could be as high as Rs 30,000 crore. Further, the regulator has suggested that their 900 Mhz spectrum — which is more efficient and generates more revenue — be taken away and auctioned at a higher reserve price of Rs 7,224 crore per Mhz.
Trai, which has been formulating a new spectrum policy in the wake of the February 2 apex Court judgment that cancelled all 122 licences issued in 2008, has said that all spectrum allocations should be done through the auction process — and the auction method will be the simultaneous multiple round auction (SMRA) format used during the 3G auctions.
The new reserve prices for spectrum varies from circle to circle, with Delhi and Mumbai having the highest prices for the 1,800 Mhz band at Rs 717.26 crore and Rs 702.14 crore for Delhi and Mumbai. According to the guidelines, spectrum will not be bundled with licences. Trai has also said that auction should exclude firms which already hold airwaves in excess of the prescribed limit.
Shock waves
* Spectrum auction to use simultaneous multiple round auction format
* 2G spectrum auction to be open to telcos holding unified licence
* 5 mega hertz (MHz) spectrum to be offered in all auctions
* Spectrum shall be offered in blocks of 1.25 MHz each
* Final bid price to be base price for subsequent auctions
* Moratorium of two years with balance payment in 10 years
* Licencees to pay 1% adjusted gross revenue as spectrum usage charge
* 2G auction validity period of spectrum should be 20 years