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Telecom spectrum: EGoM defers reserve price decision

Asks for more data on impact decides on new rollout obligations for auction winners

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The (EGoM) on telecom has deferred a decision, till later this week, on the contentious issue of a reserve price for the re-auction of 2G spectrum. At its meeting here on Wednesday, it told the Department of Telecommunications (DoT) to prepare a fresh matrix on the impact of the reserve price chosen on government revenue and operators’ rates.

The report will be presented by at the next EGoM meeting, slated for Friday, after which a decision on the base price would be taken.

However, it approved new roll-out obligations for operators who win in the auction, mandating them to cover 10 per cent of block level headquarters in three years, 20 per cent in four years and 30 per cent in five years. The obligations, less stringent than those proposed earlier, apply to both existing and new players.

CALL RATES Operators say the average impact of the reserve price would be 44-60p a min and could kill the industry
  • A report will be presented by DoT at the next EGoM meeting, slated for Friday
     
  • EGoM approved new roll-out obligations for operators who win in the auction
     
  • Obligations, less stringent than those proposed earlier, apply to both existing and new players
     
  • DoT is working on a base price range of Rs 12,000-18,000 crore
     
  • DoT to also calculate the base price range impact on rates and state revenue
     
  • The impact of spectrum usage charges of a 3-8% range on govt revenues is to be also calculated

On the impact of the reserve price, the EGoM has asked DoT to prepare a matrix of various levels of proposed prices, as well as for spectrum usage charges. According to DoT sources, they’re working on a base price range of Rs 12,000-18,000 crore (the base price for pan-India spectrum of 5MHz)-and would calculate its impact on rates and state revenue. Said one: “DOT will look at this range and calculate the impact for every Rs 1,000 crore difference." The impact of spectrum usage charges of a three to eight per cent range on government revenues is to be also calculated.

The issue on pricing has gone through various stages, starting with the Telecom Regulatory Authority of India (Trai) recommending a minimum of Rs 3,622 crore for auction of a single unit of spectrum, amounting to at least Rs 18,000 crore for a pan-Indian operation in the case of a new entrant. Following this, a DoT committee was set up, which had set the price at Rs 4,722 crore, much higher than Trai’s recommendations.

The then left this decision to the EGoM and asked to calculate the impact of the recommended price on rates. The regulator, under its new chairman, Rahul Khullar, has said a rise in rates between five to 15 paise per minute is enough for operators to maintain their profitability, after paying for the high price of spectrum. Before this, Trai had said the impact would not be more than four to six paise per minute. The operators contested this, saying the average impact would be 44-60p a minute and could kill the industry.

The operators were not happy at on Wednesday’s EGoM decision “With the new matrix, the government is unnecessarily making the whole auction process complex. The proposal to look at a higher spectrum usage charge, to eight per cent, will hurt the industry. More, the recommendations on roll-out obligations will put additional burden on the industry, as it is not economically viable for operators,” said Rajan Mathews, director-general of the Cellular Operators Association of India.

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