Dual tech firms want reserve price lowered

Write to Sibal asking to be treated differently also argue for concessional financing terms

The telecom industry body for dual technology companies such as Reliance Communications and Tata Teleservices is batting for special treatment for these companies in the coming spectrum auction.

The Association of Unified Telecom Service Providers of India or Auspi has written to telecom minister Kapil Sibal that they are not to be compared to GSM technology suppliers such as Bharti Airtel, Vodafone India and Idea Cellular.

The association said the reserve price of 800 MHz spectrum in the coming 2G auctions should be kept much lower than that for the 1,800 Mhz one. And, that the final price of 800 MHz could be derived by a separate and independent auction and not be linked to the final price of 1,800 Mhz.

Auspi said banks and financial institutions were reluctant to provide further funding to telecom projects. It wanted the initial payment for spectrum acquisition for 800/900 MHz to be kept at 10 per cent, while that of 1,800 MHz may be kept at 15 per cent.

“Government may provide a moratorium for payment of spectrum acquisition of four to five years instead of the two years as recommended by Trai (the sector regulator). The balance payment of the auction price may be allowed in 15 yearly equal instalments,” its letter said.

It also requested that securitisation of the remaining annual instalments could be at 25 per cent of value by way of bank guarantee and 75 per cent by way of corporate guarantee. Auspi also wants the rate of interest for the auction price deposit be as applicable on 10-year government securities.

“Assignment of telecom licenses and spectrum may kindly be allowed in favour of domestic as well as international lenders, as the borrowing cost is substantially lower in international markets than in domestic. More so, given the huge size of borrowings, telecom companies cannot solely rely on domestic banks. As such, they need to tap international lenders as well,” the letter said.

Recently, J S Deepak, joint secretary in the commerce ministry, said dual technology operators should be charged at the auction-discovered prices. Auspi requested DoT to ignore some of his suggestions, saying it would be illegal to target dual technology operators alone for payment of spectrum at a market-determined price.

According to Auspi, dual technology spectrum was allotted to the existing licensees based on existing policy, on payment of Rs 1,658 crore, This put dual technology operators at a competitive disadvantage vis-à-vis the incumbent GSM operators, who continued to get spectrum up to 10 MHz till 2009 without payment of any fees at all. “The fees work out to Rs 3,300 crore for a comparable 20-year period enjoyed by others, as the spectrum received by dual tech operators is for the duration of existing licences, which unexpired period works out to about 10 years,” Auspi said in the letter.