EGoM refers spectrum pricing to TRAI

To ask regulator to give recomendation in 60 days

The Empowered Group of Ministers (EGoM) on telecom today decided to seek fresh views from the Telecom Regulatory Authority of India (TRAI) on what should be the reserve price of the spectrum to be auctioned in the 1800MHz, 900MHz and 800MHz bands.
 

“The EGoM had a meeting for more than an hour today. It has decided to refer the issue of spectrum pricing for the next auction to the regulator. We do not have any expertise to determine the reserve price of the spectrum. We will ask TRAI to give its recommendations within 60 days,” said Kapil Sibal, minister for communications and IT. Sibal, who is also the law minister, is a member of the EGoM.
 

Interestingly, this is the option that Planning Commission deputy Chairman Montek Singh Ahluwalia had suggested, in April this year, following the two rounds of auction November 2012 and March 2013 that received muted response from the telecom operators. Operators had, again and again, blamed high reserve price as the reason for not participating in the auctions.
 

Meanwhile, the ministerial panel has also decided that the Department of Telecommunications (DoT) should start work on getting the notice inviting applications (NIA) ready, so that the Government can start the auction process immediately after it receives recommendation from TRAI. “We want the auction to happen as soon possible,” Sibal said, adding that NIA documentation would be ready without mentioning the reserve price, which DoT would add after getting TRAI’s advice.

However, the EGoM has not taken any decision on the refarming issue. “No decision can be taken before the reserve price is determined,” added the minister.
 

The ministerial panel has discussed two more options to finalise the the reserve price of the spectrum to be auctioned. It could have retained the same reserve prices as per the decision of the Cabinet for 800MHz, 900MHz and 1800MHz bands, or revised the reserve price after duly considering the developments relating to the auctions held in November 2012 and March 2013. 
 

According to a recent communication, recommendations of the EGoM on the reserve price will be placed before the Union Cabinet for approval.
 

The Government needs to conduct another round of auction to comply with the Supreme Court order on February 15 asking the Government to auction the entire spectrum available after licence cancellation. 
 

The EGoM, headed by Finance Minister P Chidambaram, was also expected to take a call on the number of telecom circles in which the third round of spectrum auction should be conducted. 
 

Further, the ministerial panel was expected to discuss the payment mode for the next round of auction. However, Sibal did not comment on the issue. The Government had, in last auctions, given the companies to pay upfront or in deferred mode after a company wins spectrum through auction. In deferred payment mode a GSM telco pays 33 per cent (25 per cent for CDMA players) of the total bidding amount with a two year moratorium and the remaining amount is being paid in 10 equal instalments that attract an interest rate of 9.75 per cent.
 

In November, the Government has earned Rs 9,407.64 crore by auctioning 1800MHz spectrum. Though the government had auctioned 176 blocks (1.25MHz each) of the total 198 blocks in the November auction, it managed to get bidders for 101 blocks. 
 

Due to high reserve price, Mumbai, Delhi, Karnataka and Rajasthan did not get any bidder in the November auction. The government had then reduced the base price by 30 per cent for these circles for the March auction. It had also reduced the base price of 800MHz spectrum by 50 per cent after it failed to attract bidders for November auction.
 

In March 2013, only Sistema Shyam Teleservices bid for spectrum in the 800MHz band for select circles.