EGoM for base spectrum price between Rs 14,111-Rs 15,111 cr

In a relief to telecom operators, the Empowered Group of Ministers (EGoM) is believed to have suggested setting a 20 per cent lower base or bid start price at Rs 14,111-15,111 crore for the proposed spectrum auction.

"The EGoM has suggested a base price between Rs 14,111 - Rs 15,111 crore for 5 Mhz of airwaves in auction," sources said.

This is about 20 per cent lower than around Rs 18,000 crore reserve price for pan-India spectrum (in 1800 Mhz band) suggested by telecom regulator TRAI for the auction of spectrum vacated from Supreme Court cancelling 122 licences issued by the then Telecom Minister A Raja in 2008.

However, industry had been pitching for a 80 per cent cut in the reserve price as they feel TRAI recommended rates would lead to upto 100 per cent hike in mobile telephone charges.

"It is saddening to know that EGoM has not given due consideration to the fundamental issue of unsustainable high reserve prices which will significantly increase costs, thereby invariably increasing the tariffs," industry body COAI's Director General Rajan S Mathews said.

EGoM has suggested to fix 1.3 times of this price as minimum price for companies that may bid for airwaves that are being used for providing CDMA services at present.

Russian conglomerate Sistema, who holds majority stake in Indian firm Sistema Shyam Teleservices, said that it will exit if the minimum price is not brought to around Rs 1,650 crore which its partner paid to get telecom licence in 2008.

It argued that the final price of airwaves should be determined through market demand.
On the other hand, GSM industry body Cellular Operators Association of India has called it "discrimination".

"A similar option is not being extended to GSM operators to retain their 900 MHz spectrum at a price of 1.3 times of 1800 MHz," Mathews said.

Association of Unified Telecom Service Providers of India (AUSPI), which represents CDMA players, said that the reserve price should be kept at Rs 3,500 crore for 800 Mhz spectrum band.

"Common man wants simple 2G services. There is no need to liberalise spectrum in 800 Mhz band as there are hardly any takers for airwaves in these frequencies. Liberalised spectrum will raise the tariff and take telecom services out of reach of common man," AUSPI Secretary General SC Khanna said.

The EGoM is likely to meet tomorrow.

"The decision to lower base or minimum price for auction has been made keeping in mind budgetary provision that set a target of Rs 45,000 crore as non-tax revenue on account of receipt from the auction of spectrum in the cuurent fiscal year," sources said.

In another relief to potential bidders for spectrum, EGoM has approved TRAI's model for payment terms.

TRAI recommended to initially take 33 per cent of final price of spectrum achieved in auction, two yeas moratorium thereafter and balance payment of spectrum price in installment over a period of 10 years.

However, besides reducing the base price, EGoM is learnt to have decided against reduction in annual fee called Spectrum Usage Charge (SUC) to 3 per cent as was finally recommended to it by inter-ministerial panel, the Telecom Commission, at Department of Telecommunications.

The high-powered panel, led by Home Minister P Chidambaram, has recommended to either to fix SUC at 5 per cent or continue with the practice at present of charging SUC between 3 to 8 per cent.

EGoM has left the final decision on spectrum pricing, spectrum usage charge and terms of payment on the Cabinet.

The same will be sent to the Cabinet headed by Prime Minister Manmohan Singh for a decision.

The Telecom Regulatory Authority of India (TRAI) had recommended a base price of Rs 3,622 crore per unit of spectrum, called MegaHertz. This base price translates to over Rs 18,000 crore for a pan-India spectrum for new companies.

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