EGoM to discuss spectrum pricing issue for next auction tomorrow

Will discuss three options to finalise reserve price of the spectrum to be auctioned

The Empowered Group of Ministers (EGoM) on telecom, scheduled to meet on June 26, will discuss possible alternatives for prices of spectrum that would be put for auction in the next round to comply with the Supreme Court order on February 15, asking the government to auction the entire spectrum available after licence cancellation. According to a recent communication, the EGoM will discuss three options to finalise the reserve price of the spectrum to be auctioned.

It may retain the same reserve prices as per the decision of the Cabinet for 800 MHz, 900 MHz and 1800 MHz bands, or revise the reserve price after duly considering the developments relating to the auctions held in November 2012 and March 2013. The EGoM may also seek fresh recommendations from the Telecom Regulatory Authority (TRAI). Recommendations of the EGoM on the reserve price will be placed before the Union Cabinet for approval.

Following the two rounds of unsuccessful auctions, Planning Commission Deputy Chairman Montek Singh Ahluwalia, in April this year, had suggested that the government should seek fresh views from TRAI before taking a decision on spectrum pricing.

The EGoM, headed by Finance Minister P Chidambaram, would also take a call on the number of telecom circles in which the third round of spectrum auction should be conducted. Besides, the ministerial panel will also take a decision on the payment mode for the next round of auction. 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 installments that attract an interest rate of 9.75 per cent.

The EGoM will also decide the timing of the next round of auction. However, it is noted that the auction would be conducted within 70 days of receiving approval from the EGoM or Cabinet.

It will also decide the quantum of spectrum in the three bands that would be auctioned in the next round.

In November, the Government has earned Rs 9,407.64 crore by auctioning 1800 MHz spectrum. Though the government had auctioned 176 blocks (1.25 MHz 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 800 MHz spectrum by 50 per cent after it failed to attract bidders for November auction.