Telecom stocks in demand

Five telecom stocks rose by 2% to 5.42% at 10:23 IST on BSE after the sector regulator on Monday, 9 September 2013, recommended sharp cuts in reserve prices for the next round of spectrum auctions.

Bharti Airtel (up 5.42%), Idea Cellular (up 4.27%), MTNL (up 3.06%), Reliance Communications (up 2.11%) and Tata Teleservices (Maharashtra) (up 2%), edged higher.

The S&P BSE Sensex was up 512.29 points, or 2.66% at 19,782.35.

For the 1800 megahertz (MHz) frequency band that are used for basic mobile services, the Telecom Regulatory Authority of India's (TRAI) has recommended a new reserve price of Rs 1496 crore per megahertz (MHz). According to media reports, the recommended price is 60% lesser compared to its previous suggestions.

The regulator has slashed the proposed spectrum auction reserve price in 900 MHz band in Delhi, Mumbai and Kolkata to Rs 650 crore per MHz, as against Rs 3074.18 crore per MHz in the previous auction.

The regulator said no spectrum would be reserved for existing players when their licences expire and suggested that airwaves can be traded.

TRAI has also recommended that a flat spectrum usage charges (SUC) of 3% of the gross revenue should be levied, instead of the existing range of 2% - 8%. This will come into effect from 1 April 2014.

For existing telecom companies a reduced base price is vital as this will also be linked to costs they will incur in renewing their mobile permits from next year.

Auction of 2G mobile phone airwaves came after the Supreme Court ordered the cancellation of permits granted to eight carriers in a scandal-tainted process in 2008. The Supreme Court in February last year had cancelled 122 2G telecom licences.

The government in the previous two rounds of spectrum auction was able to sell airwaves for around Rs 13000 crore, way below its target of garnering about Rs 40000 crore, as operators said the reserve price was too stiff.

In the first auction held in November 2012, the government had earned Rs 9407.64 crore by auctioning 1,800 MHz spectrum.

In the second auction held in March 2013, the government got just Rs 3639 crore from the auction of 800 MHz CDMA band where Sistema Shyam Teleservices was the lone bidder for eight circles.

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