New Delhi: The government moved a step forward in its plans for the auction of telecom spectrum, but held back on the crucial decision of the reserve price.
The empowered group of ministers (eGoM) dealing with the 2G spectrum auction, which met late on Tuesday, approved a decision to put eight slots of spectrum on the block and also included a top-up option—making it easier for the entry of new operators and thereby ensuring greater competition.
“We have taken some decisions,” communications minister Kapil Sibal said.
The eGoM chaired by finance minister Pranab Mukherjee has defence minister A.K. Antony, home minister P. Chidambaram, food and agriculture minister Sharad Pawar, law minister Salman Khurshid, information and broadcasting minister Ambika Soni, Planning Commission deputy chairman Montek Singh Ahluwalia and Sibal as members.
An empowered group of ministers has approved increasing the number of 2G spectrum slots for auction from four to eight. Mint’s Shauvik Ghosh looks at what the decision will mean
According to an official who attended the meeting, in case a new operator is able to win a slot of 1.25 megahertz (MHz) spectrum and needs a minimum of 5MHz to start services, the quantum allocated to the successful bidder will be topped up to 5MHz on payment of the full amount. The official spoke on condition of anonymity.
In this scenario, there will be a total of eight slots of 1.25MHz of airwaves up for sale, but the total allocated spectrum could go up to 13.75MHz.
The Telecom Regulatory Authority of India (Trai), which was to submit an analysis of the cost and tariff impact of the spectrum price to the eGoM before the meeting, was not able to meet the deadline and is expected to submit its report by 11 June.
The eGoM also agreed with the Telecom Commission that decided to reject Trai’s deferred payment proposal. Trai had suggested that successful bidders be allowed to pay 33% of the price at the time of being declared winners and pay the remaining portion in equated instalments.
A department of telecommunications (DoT) official said the eGoM was made a presentation of a new timetable as well. “We expect to publish the information memorandum by 6 August,” the official said, also requesting anonymity.
The eGoM deferred decisions on the reserve price and the validity period of the spectrum to be allocated until after Trai submits its analysis report. As reported by Mint on 29 May, the Telecom Commission asked Trai to see whether the spectrum can be paid for 10 years while keeping the validity at 20 years. The payment for the subsequent 10 years would be made based on the market price at the time. The move was aimed at making it easier for the telcos to raise funds for the auction.
Trai had suggested a reserve price of Rs 3,622.18 crore, a proposal that has faced severe criticism from all sides of the sector, as many believe it would lead to a 100% increase in tariffs and raise questions about the business viability of the country’s telecom operators.
The eGoM is expected to take all the decisions by 22 June.
A report by consulting firm PricewaterhouseCoopers prepared for GSM (global system for mobile) operators’ lobby, Cellular Operators Association of India, said phone usage tariffs could go up by 90 paise a minute in the metros and 20-34 paise on an average across the country if the regulator’s recommendations were accepted.
The increase in the quantum of spectrum is a positive for Uninor and Idea. It might also lead to greater participation from Bharti Airtel and the other older operators, in a bid to protect themselves from the refarming policy, a Mumbai-based analyst working with a multinational brokerage firm said.
Meanwhile, DoT also published a fresh request for proposal for prospective auctioneers on Tuesday. The prospective auctioneers are expected to submit bids by 5 July, after the pre-bid conference (for auctioneers) on 12 June.