Trai refuses to alter proposed spectrum price

But says more than 5 MHz can be auctioned in 9 circles

The telecom regulator on Sunday stuck to its recommended base price for the 2G spectrum auction at Rs 3,622 crore per MHz in the 1,800-MHz band. Telecom companies had earlier launched a strong attack on the Telecom Regulatory Authority of India (Trai) and said its recommendations would jeapordise the sector and force them to raise tariffs 30-40 per cent.

The regulator has, however, given some leeway on its earlier proposal to auction only five MHz in each circle. It has now agreed that in nine circles, more spectrum, up to 10 MHz, could be put on the block if available after being reserved for refarming in the 1,800-MHz band. It has said, “Where more than five MHz of spectrum is available after reserving it for auction and refarming, a total of 10 MHz in eight blocks of 1.25 MHz each may be put to auction instead of five MHz of spectrum.” These circles include Andhra Pradesh, Karnataka, Kolkata and Tamil Nadu.

The Trai was responding to clarifications sought by the Telecom Commission, the highest decision-making body in the Department of Telecommunications (DoT). The regulator suggested in states where sufficient spectrum is not available in the 800-MHz frequency, the government could consider lowering the reserve price. The regulator also stuck to its earlier stand that the spectrum regime should be liberalised and the usage delinked from the services offered. It means that 1,800-MHz spectrum can be used not only for 2G but also for 4G services, for instance.

The Trai refused to accept the commission’s rejection of its proposal to allow telcos staggered payment of auction money. “We strongly urge the DoT to explore the option rather than brushing it aside,” it said. It has also clarified the cancelled licensees would be treated as new operators, as they will have to apply for new licences.

However, in a move that will hit operators, the regulator has increased the spectrum usage charges to three per cent from one per cent recommended earlier.

The Trai has said according to an analysis of the financial implications on account of the reduction in spectrum usage charges to one per cent, the amount of savings would be around 68 per cent of the total amount of renewal fees to be paid by the entire industry. However, if the spectrum usage charges are fixed at three per cent, the savings would be reduced to around 31 per cent, which would still give a reasonable discount.

On the impact of the high base price on tariffs, the regulator has again reiterated the impact would be less than four paise per minute on mobile tariffs. It said, “The results indicate that mostly the impact on tariffs is less than four paise per minute and often much lower. This can be either absorbed by the service providers from the additional minutes that are generated or recovered through charges for different retail and wholesale services. The manner in which these will be recovered will vary among service providers depending on individual business strategies." After the response, the Telecom Commission is expected to meet next week and send its final views to the Empowered Group of Ministers (EGoM) under Finance Minister Pranab Mukherjee for a final decision.