DoT may go with FinMin on doubling 3G base price

Under pressure to charge market-driven price for spectrum, the Department of Telecommunications (DoT) may finalise the higher reserve price for 3G services at Rs 4,040 crore for pan-India allocation, as recommended by the finance ministry.

Sources in the know said that the DoT is considering the increased reserve price for 3G services as it was also recommended by the Telecom Regulatory Authority of India (Trai) that any allocation of spectrum in the future should be in accordance with the market forces.

The DoT, however, has left the final decision on prices to the Cabinet.

According to the guidelines for 3G services, the DoT has proposed to allocate two blocks of spectrum of five MHz each to all the successful bidders, who would be participating in the auction of spectrum slated for January 30.

The industry remained divided with some supporting the 100 per cent hike in reserve price for 3G spectrum, while others opposing any change at the last minute just days before the auctioning process begins.

Since the DoT had allocated 2G start-up spectrum of 4.4 MHz along with the all-India licence at Rs 1,658 crore, one of the mobile operators justified the reserve price of Rs 4,040 crore for five MHz of 3G spectrum.

The DoT had taken a decision not to auction 2G spectrum as Trai had recommended against it, saying any hike in prices for it would favour the existing GSM operators who have been given radio frequency at the same price as late as in May 2007.

Asked by when the DoT would take the matter on 3G prices to the Cabinet, sources said comments from other concerned ministries were expected in another 3-4 days and by the end of this week the Telecom Commission may finalise its views on the subject.

In a note sent to Telecom Secretary Siddartha Behura, the finance ministry had said last week, “the reserve price may be increased from Rs 2,020 crore to Rs 4,040 crore for a pan-India allocation of two blocks of five MHz of 3G spectrum.”

The ministry has asked the DoT to modify the note incorporating revised prices before bringing it to the Cabinet Committee on Economic Affairs (CCEA).

Similarly, the finance ministry has also asked to double the reserve price for wireless broadband services, known as WiMAX, to Rs 2,000 crore for pan-India allocation. The DoT had recommended Rs 1,000 crore for the same.

Sources said the finance ministry has also questioned the rationale of limiting the auction of only four slots of spectrum in each circle.

In some circles, spectrum is available to accommodate as many as seven to eight operators, they said, adding that if the finance ministry’s reserve price for 3G spectrum was accepted, the government may garner over Rs 30,000 crore from auction.

Officials in the DoT, however, refused to give any estimates about the revenues to be generated from the sale of spectrum, saying it would depend on the level of participation of operators both domestic and international.