With the industry crying foul and fears of rise in the cell phone tariff beginning to Show the telecom regulatory Authority of India (TRAI) on Monday recommended a steep minimum price for auction of 2G telecom spectrum.
In its recommendations the Telecom Regulatory Authority of India (TRAI) proposed a minimum or base price of Rs 3,622.18 crore for every mega Hertz of spectrum in the 1800 MHz band, where radio airwaves have been vacated following the Supreme Court’s verdict on February 2 cancelling all the 122 spectrum licences allotted in 2008 during the tenure if the former telecom minister A Raja.
A pan-India spectrum in 1800 MHz band will cost Rs 18,000 crore. The reserve price is several times the base price of Rs 3,500 crore for 3G spectrum auction.
TRAI proposed that auction should be open to all companies except those having a more than prescribed limit of spectrum, potentially disqualifying incumbents like Airtel, Vodafone and BSNL.
Reacting to the TRAI recommendation, Vodafone said that the steep hike in the auction price will only harm the Industry. "We believe that several of these recommendations are retrograde and if accepted, will do irreparable harm to the industry", it said.
"It (TRAI recommendations) will hamper the ability to connect the unconnected and goes against the objectives of National Telecom Policy of ensuring improved rural tele-density and right to broadband," Vodafone said.
"Trai recommendations on the hike in reserve prices appear significantly on the higher side and is likely to be a strain on the resources of the bidders, especially with a highly competitive market landscape. Higher reserve price & resultant auction price is likely to lead to an increase in tariffs by service providers," added Jaideep Ghosh, partner at consulting firm KPMG India.
Some of the existing players are also going to be hit by recommendations as the regulator has suggested that auction for 4G spectrum should be undertaken in 2014. As a result, some of the existing players, such as Bharti, may not launch nation-wide operations for a while and compete with Mukesh Ambani''s Reliance Industries. COAI and Auspi, have also criticised Trai's recommendations.
"Trai's actions seem to be directed towards creating unnecessary constraints for the sector, overlooking the universal rules of sustainability and growth for this sector. Under such inconsistent, regressive and uncertain regulatory environment, it is inconceivable that the telecom industry, which is already in a state of doldrums, will be able to deliver on the government's vision of affordable communications, rural penetration and rollout of data services," the lobby group said.
The reserve price for 800 MHz has been fixed at Rs 7,244 crore, TRAI said, adding that spectrum will be offered in blocks of 1.25 MHz, and at least 5 MHz will be offered in the auctions.
The auction is proposed to be open to all eligible companies holding spectrum below a prescribed cap.
Also, spectrum to be assigned through auction shall be liberalised that is spectrum in any band can be used for deploying any services in any technology.
TRAI said the refarming of spectrum in the 800 MHz and 900 MHz bands should be carried out progressively at an early date but not later than the due date of renewal of the licences.
Trai also recommended that the spectrum available with service providers in the 900 MHz band should be replaced by spectrum in the 1800 MHz band, which should be charged at the price prevalent at the time of refarming.
The auction should be conducted using Simultaneous Multiple Round Auction (SMRA) format.
Trai said that the auction of spectrum in 1800 MHz and 800 MHz bands to be conducted immediately should be held in single stage. Auction of 1800 MHz spectrum can be done in current 2012-13 fiscal itself.
TRAI said all spectrum should not be auctioned at one go. As a start, 5 MHz of spectrum could be auctioned initially. Auctions could be phased out across three years. About 100 MHz is to be auctioned in phases per telecom circle.
It recommended annual usage charge for companies for all spectrum bought via auction to be 1 per cent. At present, the annual usage charge is 8 per cent.