Ray of hope for telecom firms on base price revision

In a move that could hold a flicker of hope for telecom operators, who have been opposing the high base price for the auction of 2G spectrum, the empowered group of ministers (EGoM) has quietly modified the key objective of the auction. The text of the objective has been tweaked from "revenue maximisation" to "maximising revenue but within set parameters" determined by the government.

These parameters, which will now be added, include affordability, increasing telecom density, and accessibility.

The move of the EGoM, headed by Finance Minister Pranab Mukherjee, is the first indication that the government has shifted its objective from that specified earlier -- at the time of 3G and BWA spectrum auctions some years ago -- when it was based on "maximisation of revenue". The Telecom Commission had recently endorsed the objectives for 3G and BWA auction as those for the 2G auction as well.

A second meeting of the EGoM, where the base price of spectrum for the auction will be finalised, is slated after June 20.

Operators have attacked the base price of Rs 3,622 crore (Rs 36.22 billion) for one MHz on the premise that it will make mobile telephony unaffordable, with tariffs for a minute rising by as much as 28-90

paise in metros. The telcos have said the recommendations of the Telecom Regulatory Authority of India (Trai) on base price are against the "aam aadmi".

A top Department of Telecommunications (DoT) official on Monday said: "If we were to only maximise revenues, we could have minimised the quantum of spectrum to be auctioned, without bothering if everyone had enough spectrum for growth and offering affordable services." He added the EGoM would decide on the final parameters.

The EGoM has taken the first step of moving away from the earlier stance of revenue maximisation with its decision to make available to the operators in the auction double the quantity of spectrum recommended by Trai. It decided to auction a minimum of 10 MHz of spectrum, compared to Trai's recommendation of a minimum of five MHz.

The government's decision of revenue maximisation during the 3G auctions had come under severe criticism, as operators had to pay Rs 68,000 crore (Rs 680 billion) for each tranche of five MHz of spectrum.

As a result, most operators were not able to acquire pan-Indian 3G spectrum network and had publicly said the bidding process did not consider the affordability factor.