EGoM slashes Trai's base price for spectrum by 20%

Recommends Rs 14,000-16,000 crore for five MHz of pan-India spectrum, favours staggered payment option for operators Cabinet to take final call on both

The Empowered Group of Ministers (EGoM) on telecom headed by Home Minister P Chidambaram on Friday decided to recommend a reduction in the reserve price for the 2G spectrum auction suggested by sector regulator Trai.

It is understood to have recommended a price of Rs 14,000-16,000 crore for five MHz of pan-India spectrum.

That amounts to a reduction of more than 20 per cent from the base price of Rs 18,110 crore suggested by the Trai.

It means the base price for one MHz will be Rs 2,800-3,200 crore, instead of the Trai-recommended Rs 3,622 crore.

A final decision on the price will be taken by the Cabinet, expected to meet next week.

The move provides partial relief to GSM operators, who have been critical of the Trai recommendations, saying they would lead to a substantial hike in tariffs at an average of 44-60 paise a minute.

Telecom Minister Kapil Sibal said after the meeting, “The EGoM discussed three specific issues... It will make a specific recommendation on each of these issues to the Cabinet.” He refused to give any details.

The EGoM has also favoured the Trai recommendation of permitting deferred payment by operators for the spectrum.

On spectrum usage charges, the EGoM has not accepted the regulator’s three per cent recommendation and is understood to have favoured the current charges of three-six per cent.

A top executive of a leading GSM company said, “This reduction is not good enough. We were expecting that the principles used in the 3G auction would be used here. In that, the base price was only one-fifth of the auction-discovered price.”

Rajan Mathews, director general of the Cellular Operators Association of India, said, “The reduction in the reserve price is a welcome move.

However, we feel it is still high. If the government tries to increase the spectrum usage charge to get more revenues, it will put pressure on tariffs.”

THE SPECTRUM SEE-SAW Various decisions on the pricing of 2G airwaves so far
	Reserve price (Rs cr)*	Spectrum usage charges
Trai	3,622	1%, revised to 3%
Dot committee	4,722	3%
Matrix prepared by DoT	2,400-3,600	3-8%
EGoM	2,800-3,200	3-6%
*Per MHz
EGoM DECISIONS
Staggered payment option recommended; reserve price between Rs 14,000 crore and Rs 16,000 crore for five-MHz pan-India spectrum recommended  New roll-out obligations approved for operators who make winning bids at the 2G auction, which would mandate them to cover 10% Block-level headquarters in three years, 20% in four years and 30% in five years Mortgage of spectrum favoured; operators can mortgage spectrum with banks to avail funds while banks can auction spectrum mortgaged with them in case of a default Decision to auction a minimum of 10 MHz of 2G spectrum cleared

No decision has been taken on a proposal to charge incumbent operators a one-time fee for their existing 2G airwave holdings, based on a price to be determined by auction.