Spectrum price will hurt Digital India, warn telecos

PM’s intervention sought as the auction is coming up in February

GN Bureau | January 9, 2015



Invoking Digital India, promoted by prime minister Narendra Modi, the telecom operators have asked the government to review the review the base price (Rs 3,980 crore) for popular and efficient 900 MHz airwaves for the February auction.

The Cellular Operators Association of India (COAI), the trade body representing GSM operators such as Bharti Airtel, Vodafone India and Idea Cellular, has written to the PM and telecom minister Ravi Shankar Prasad on this issue. It has also exhorted the minister to ensure at least 15-20 MHz of 3G airwaves in the 2100 MHz band is available for along with 900 MHz bandwidth next month.

"Lack of sufficient quantities of spectrum will constrain operators from offering affordable voice and internet services to the masses and will delay the implementation of Digital India vision," says another mobile service provider Uninor.

"Reserve price for the proposed spectrum auction in the 900 MHz band in 18 circles has been increased by 32.5% over what was recommended by Telecom Regulatory Authority of India (Trai)," said COAI. It added that the 32.5% escalation over Trai's recommendation translated into a steep increase of Rs 4,880 crore for 5 MHz blocks across 18 regions.
 
The COAI has warned that such a high reserve price of 900 MHz spectrum would hurt business viability of operators and make it more difficult for companies to raise funds. The sector is already facing a debt burden of over Rs 2,65,000 crore.
 
If the government refuses to consider the demand of the operators, the tariffs are going to go up. Even otherwise, the companies may be looking to increase rates as they will have to make fresh investments to buy the available spectrum.
 
Meanwhile, strangely a department of telecom panel on Trai's recommendation on 3G spectrum price has questioned the methodology for arriving at base rate of Rs. 2,720 crore per megahertz for these airwaves.

The Trai on December 31 had recommended this rate for 3G spectrum. This is about 19 percent lower compared to the price paid by service providers in the 2010 auction.

The panel is believed to have said that the last auction-determined price for a spectrum band should be the guiding benchmark for determining the reserve price for that band in a subsequent auction. The pan-India per Mhz price paid by telecom companies was Rs. 3,350.11 crore.

The other points on which the panel wants clarity pertains to maximum quantum of spectrum a company can purchase, timeline for network roll-out, payment terms, and annual spectrum charges.

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