Telecom operators must pay for excess spectrum

Trai opposes auction of 2G spectrum; may collect up to Rs 35,000 cr

Telecom operators must pay for excess spectrum

They will have to pay at the current price of spectrum (as will be determined by 3G auction) upto 8 Mhz and after that it will be charged at 1.3 times the current price. This would mean existing operators would have to pay at 3G rates for spectrum they hold above 6.2 Mhz.

The big three players — Bharti Airtel, Vodafone and BSNL — hold around 10 Mhz spectrum in many key circles. They got the additional spectrum under the present system where spectrum allocation was linked with customer acquisition. Trai also said for CDMA operators the spectrum assigned beyond the contracted amount of 5 Mhz will have to be paid for.

Virtually endorsing telecom ministry’s decision not to auction 2G spectrum two years ago, Trai said bidding out mobile spectrum would not have yielded major economic gains for the exchequer.

“It is not feasible to subject the spectrum in 800-900 -1800 Mhz band to auction process, considering that the amount of spectrum after meeting the obligation of contracted spectrum is very limited and number of claimant for additional spectrum would be extremely few,” Trai Chairman J S Sharma said at a press conference here.

The telecom ministry’s decision to sell 2G spectrum in 2008 at 2001 prices had become the subject of a major controversy, with the opposition parties alleging a scam that cost the government Rs 60,000 crore.

The telecom regulator released its recommendation report on spectrum allocation and pricing. Trai also suggested that from now 2G spectrum (radio waves) could be priced on par with what is discovered through the 3G spectrum auction and also delinking the sale of spectrum from issue of licence, as is the current practice. Sarma added: “The authority is conscious of the fact that there are several views about deriving the true price of 2G spectrum and keeping this in view the authority is separately initiating an exercise to further study the subject and would apprise the government later, but for the present the authority recommends that 3G prices could be adopted as the current price of 2G spectrum.”

Telecom Minister A Raja’s decision to allocate mobile licences with 4.4 Mhz of 2G spectrum at a price of Rs 1,651 crore to a host of companies that included realty player Unitech Wireless, Videocon, Swan, prompted allegations of corruption. The blow also came for many new mobile licencees, including Tata, Uninor and Videocon, who are yet to receive any start-up spectrum in many circles, including Delhi. There are many telcos who are yet to get start-up spectrum for any circle.

Sarma said preference would be given to those who want to get the contracted 6.2 Mhz of spectrum and those who are waiting for the next level (8 Mhz of spectrum). The least priority is those who are waiting to get start-up spectrum.

Relaxing M&A

One of the far-reaching recommendations made by Trai was the end of 3-year lock-in restriction that prevented telecom firms from selling majority stakes. The change will help consolidation by allowing mergers and acquisitions in the world’s fastest growing telecom market.

Such mergers and acquisitions would be subject to the merged entity having a market share not above 30 per cent in terms of subscriber base, as well as adjusted gross revenue. What is more, following such mergers, there must be a minimum of six players for any circle.  There are 15 operators and 584 million mobile phone users in India.

“We are clearly saying we should consolidate. We are not mandating consolidation, but facilitating it. Our proposals are clearly in that direction,” Sarma said. Trai expects to raise Rs 30,000-35,000 crore as one-time spectrum charges from these operators.

It said telcos should not be given free spectrum when their licences come up for renewal, but must pay market rates based on 3G prices.  Trai has also capped the spectrum allotment to GSM and CDMA mobile companies at 10 Mhz and 7 Mhz per operator, respectively and has fixed spectrum usage fees at 0.5 per cent of revenue for spectrum up to 6.2 Mhz. Beyond 6.2 Mhz, a fee of 1 per cent of the operator’s revenue will be charged. The recommendations of Trai have to be accepted by the telecom ministry before they become law.

Move will hit growth, says operators’ body

GSM operators’ association COAI, on Tuesday, said the rising cost of spectrum could affect telecom growth plans, particularly in rural areas, reports PTI from New Delhi.

Tele-density in rural areas could be the biggest casualty. “Growth could be hampered,” said COAI Director-General Rajan S Mathews on Trai recommendations, which have suggested that telcos pay for 2G spectrum beyond the contracted amount of 6.2 Mhz, based on prices discovered through the 3G auction.

Asked if the rising spectrum costs suggested by Trai could lead to a reversal of the current low tariff regime, as operators would try to recover costs, he said, “tariffs can’t be arbitrarily increased.”

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