Trai moots 2% admin fee on highest 3G bid amount

Adding to the apprehension of the potential bidders for third generation (3G) spectrum in India, the Telecom Regulatory Authority of India (Trai) today  recommended a levy of additional 2 per cent on the the highest bid amount as annual administrative charge which will be paid by successful bidders annually.

This is over and above what an operator has to pay as spectrum usage charges which is calaculated as a certain percentage of the total revenue made by an operator.

At the moment, successful bidders will have to shell out 3 to 8 per cent of their aggregate gross revenues (AGR) as spectrum usage charges which varies according to the amount of spectrum used by an operator, which for older players would include both 2G as well as 3G spectrum.

Standalone 3G operators who do not have 2G spectrum would have to pay an annual spectrum charge of 3 per cent of annual AGR, which is equivalent to the lowest slab of incumbent mobile operator offering 2G services.

However, Trai has provided the players a one year moratorium from the date of allocation of spectrum for payment of administrative charge due to the time required by the operators to roll out their services after the allocation of spectrum.

This might prove to be a deterrent for the potential bidders. TV Ramachandran, director-general of GSM lobby, Cellular Operators Association of India (COAI), said: “This is a huge disappointment and is a matter of concern. It will have a direct impact on the operators who are looking to bid for 3G spectrum. The operators will take this extra charge into account when they bid, which will lead to decline in the auction prices.”

“This will lead to a decrease in the auction sales proceed which the government will get as a result of these auctions. Therefore, the finance ministry will have to take a serious look at this issue,” he added.

Further, the regulator has recommended that to maximise the number of 3G operators in the country all available spectrum in 2.1GHz, including anticipated availability within the next one year should be auctioned. However, DoT has been looking at auctioning a maximum of five operators for 3G though there are many circles in which spectrum for more than five are available.

Communication minister A Raja has publicly stated earlier that they might look at auctioning anything between 5 to 10 operators for 3G. Even the finance ministry has been pushing for a one time auction of 3G spectrum based on whatever spectrum is potentially available.

The auctions for 3G spectrum are expected to start in the beginning of February. The information memorandum that will detail the 3G auction process was expected to come out on December 8. However, given the recent recommendations by Trai and the final approval required by DoT on the issue, the process could be delayed.