The Telecom Regulatory Authority of India (Trai) on Monday proposed a high reserve price for telecom spectrum to be auctioned, at nearly Rs 3,622 crore (Rs 36.22 billion) per MHz in the 1,800-MHz band (for GSM services).
The reserve price for auction of spectrum is close to 10 times higher than what operators had paid in 2008 for acquiring licences at Rs 1,658 crore (Rs 16.58 billion), which came bundled with 4.4-MHz 2G spectrum.
The base price for 3G spectrum was fixed at Rs 3,500 crore (Rs 35 billion) for five MHz in 2010, which would make the recommended price five times higher than the 3G base price.
The recommended price is also eight per cent higher than what was paid by the winning operators for 3G spectrum, which came to Rs 3,350 crore (Rs 33.5 billion) per MHz. The move follows the Supreme Court ordering the cancellation of 122 new licences issued in 2008 and the auction of vacated spectrum in four months.
The development may come as a blow to companies whose licences were impacted by the SC order and were looking at the auction to win them back. Newer players such as Uninor and Videocon are offering services through spectrum in the 1,800-MHz band. Sistema Shyam, a CDMA player, uses the 800-MHz band.
For the 800-MHz (for CDMA services) and 900-MHz (for GSM services) bands, Trai has proposed a reserve price of about Rs 7,244 crore (Rs 72.44 billion), double of that kept in the 1,800 MHz band.
"An assessment of the value of the available spectrum in different bands on the basis of the reserve price works out to about Rs 7 lakh crore," Trai said.
The auction of 3G spectrum in 2010 had fetched Rs 67,700 crore (Rs 677 billion). The government has fixed Rs 40,000 crore (Rs 400 billion) as the target from the auction of spectrum this year.
Operators have expressed disappointment over the proposed pricing mechanism. COAI (Cellular Operators' Association of India) Director General Rajan Mathews said, "The reserve price has been kept at a very high base. This will kill the telecom industry, create roadblocks for new players and make it further difficult for existing operators. The current mobile tariff at one paisa per second will be impossible if operators bid at such high prices."
New player Uninor, a joint venture between Norway's Telenor and Unitech Group, said, "It seems obvious some of these recommendations will create a severe negative impact on the entire industry. It is up to the political
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