Allow staggered payments for spectrum auction: Auspi

The Association of Unified Telecom Service Providers of India (Auspi) has suggested telecom players be allowed to make initial payments of 15 per cent, with a moratorium of four-five years, after the auction of spectrum, as banks and financial institutions were still apprehensive about lending to telecom projects.

In its recommendations, the Telecom Regulatory Authority of India (Trai) had proposed a staggered payment schedule for telecom players in the telecom spectrum auction. However, this was rejected by the Telecom Commission, the Department of Telecommunication’s highest policy-making body.

In a letter to Finance Minister Pranab Mukherjee, who heads the empowered group of ministers (EGoM) on spectrum auction, Auspi said, “Considering banks and financial institutions are literally jittery to provide additional funding to telecom projects, the government should bring about more liberal financing terms to face the payout burden of spectrum auctions.”

Auspi has suggested 15 per cent initial payment for spectrum acquisition in the 1,800 MHz, 2,100 MHz and 2,300 MHz bands, and an initial payment of 10 per cent in the 700 MHz, 800 MHz and 900 MHz bands. It added remaining amount could be paid in equal instalments through 15 years. It added securitisation for the annual instalments could be 25 per cent of value by way of bank guarantees and 75 per cent by way of corporate guarantees. The rate of interest applicable for the price may be that on 10-year government securities, it had said.

The association also favoured spectrum refarming during the renewal of operator licences and reiterated the reserve price per MHz for the 1,800 MHz band was extremely high. The reserve price, it said, should be such that it led to free market discovery of the ultimate price by making available a fair number of slots in the 1,800 MHz band for 2G telecom spectrum auction.

“We suggest the reserve price should be fixed at the level of the 3G reserve price---Rs 3,500 crore for 5 MHz. Any reserve price beyond this would not be economically justified due to the high rates and the resultant impact of a steep fall in the ARPU (average revenue per user),” the letter stated.

According to a Supreme Court directive, the government has to conduct the auction of telecom spectrum by August 31. The EGoM on spectrum auction is scheduled to meet tomorrow to finalise the auction rules, including the reserve price. Trai had recommended a price of Rs 3,622 crore for one Mhz of spectrum in 1,800 Mhz band. However, telecom players had said a price this high would kill the industry and lead to an increase in mobile rates.