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Telecom Commission unlikely to give nod for more hike in 2G auction reserve price

The Telecom Commission is unlikely to okay a 17 per cent price hike in the reserve price as suggested by the Department of Telecommunication.

Sanjay Singh | May 23, 2012 | Updated 13:37 IST

The Telecom Commission (TC) is not likely to give the go-ahead for a 17 per cent price hike in the reserve price for 2G spectrum auction suggested by the department of telecommunications (DoT) over and above the price recommended by the Telecom Regulatory Authority of India (Trai). According to sources, TC in its meeting on May 24 will look into the ground realities before taking a decision.

Spectrum pricing in India is amongst the highest in the world and the government is worried about result of the upcoming auction as banks are reluctant to fund telcos for the auction. In fact, there is a thinking in the government that the reserve price of the 2G spectrum could be scaled down to some extent as it could lead to a hike in phone tariffs.

DoT has arrived at the 17 per cent hike in price of the spectrum above Trai's reserve price after working out its own calculations. Some TC members are unwilling to cut the price due to political compulsions of the UPA government. Moreover, the government is expecting good returns as it had raked in Rs 1.06 lakh crore by auctioning 3G and BWA spectrum in 2010.

According to industry body Cellular Operators Association of India (COAI), if the bid is done as per Trai recommendations, the industry will need to further raise its debt burden from the current level of Rs 1.85 lakh crore to Rs 2.72 lakh crore in next five years.

The industry has been crying foul as Trai has recommended, among other proposals, a reserve price of Rs 3,622 crore for 1 MHz pan-India spectrum, which is about 10 times higher than the price at which 2G licences were allocated in 2008 under tainted former telecom minister A. Raja.

COAI on Tuesday said telecom tariffs will rise by 90 paise per minute in metros and 20-34 paise on an average across the country if Trai's recommendations are accepted. COAI reached the figures based on a joint study with PricewaterhouseCoopers (PwC) India on impact of Trai's spectrum recommendations on consumers and the industry.

"Our study reveals that the impact on consumers could be very considerable and also that the industry is not ready to bear further deterioration in its financial performance," Mohammad Chowdhury, leader, telecom, PwC India, said. Trai has said the hike would be only over four paise per minute. Currently, telecom operators on an average charge 75 paise per minute on every call.

"TRAI's calculations are fundamentally flawed. They would affect the people at the bottom of the pyramid significantly. On the other hand, if the operators don't increase tariffs, they go out of business. The impact will be on competition. If the competition decreases, the tariffs rise," said Rajat Mukherjee, chief corporate officer, Idea Cellular.

The PwC study has slammed Trai's assessment that the share of non-voice services would grow to 50 per cent of the revenue of a firm by 2020. In 2011-12, the non-voice revenue was 14 per cent of the total revenue.

According to the study, financial performance of the operators will be impacted significantly by the recommendations due to the proposed heavy spectrum costs.

Courtesy: Mail Today

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