Trai strongly defends auction proposals

The Telecom Regulatory Authority of India (Trai) has strongly defended its recommendations on spectrum re-auction. It has written to the Department of Telecommunications (DoT) to reject the contentions of the chiefs of four telecom companies, including Bharti Airtel, Vodafone and Idea Cellular, on the issue. The operators had said Trai recommendations would lead to a 30 per cent increase in rates. And, that refarming of spectrum was not in line with the best international practices.

Trai said there was no reason to believe the reserve price it had recommended (for the auction) was unreasonable. According to its calculation, Ebitda (earnings before interest, taxes, depreciation and amortisation) and return on capital employed show a healthy and increasing trend over the next 20 years, based on the new base price for auction of spectrum.

Rejecting the operators’ suggestion that the reserve price should be indexed to that of 2007 (which was also the 2001 price) or to the 3G spectrum reserve price, Trai said this would mean giving the nation’s resources at a low price to the operators. “It is surprising that senior industrialists should make such a demand,” said the Trai communication to DoT Secretary R Chandrashekhar.

It said the recommended reserve price ensures full value was realised for the spectrum to the government, estimated at Rs 7 lakh crore, without compromising profitability of the industry. Trai has proposed a steep reserve price of Rs 3,622 crore for every MHz of the 1,800 MHz band, 10 times what the operators paid for buying licences (then bundled with 4.4 Mhz of spectrum) in 2008, at Rs 1,658 crore.