Spectrum auction | EGoM defers pricing decision

New Delhi: The empowered group of ministers (eGoM) looking into the rules that will govern the upcoming auction of second-generation (2G) telecom spectrum, has again postponed the crucial decision on the base price.

The ministerial panel, headed by home minister P. Chidambaram, however, did arrive at a consensus on stricter roll-out obligations for successful bidders.

“The roll-out obligations have been enhanced slightly. The winners will have to roll out their services in 10% of DHQs (district headquarters) by the third year, 20% of DHQs in the fourth year and they have to cover 30% of DHQs where they have won spectrum by the fifth year,” said a senior department of telecommunications (DoT) official who was present at the meeting, on condition of anonymity.

The Telecom Regulatory Authority of India (Trai) had earlier recommended coverage of 50% of villages, with more than 2,000 people, in three years, and 100% coverage of the country in four years from the spectrum allocation date by the operators that win spectrum in the auction.

A decision on the reserve price for the spectrum to be auctioned is likely to be taken at the next meeting, expected to take place on Friday, the official said. The eGoM is also expected to decide on the spectrum usage charge to be paid by successful bidders at the next meeting.

DoT has also been asked to prepare a matrix of various levels of reserve price and spectrum usage charge at every Rs1,000 crore difference in descending order and the effect that will have on tariffs for the end-consumer and the revenue accrued to the government. In its earlier meeting, held on 12 July, the eGoM had decided to allow mortgaging of spectrum by winning bidders. It also approved the proposal to let banks auction mortgage spectrum in case the operator defaults on the loans. Another key decision, taken at the last meeting, was to ask the Supreme Court for a second extension in the deadline to auction the spectrum.

The 2 February apex court decision that cancelled 122 telecom licences and spectrum allocated to nine firms, also ordered the government to auction the spectrum by 2 June. This was later extended to 31 August.

Trai had recommended a base price of Rs3,622 crore per Mhz of spectrum, in the 1,800Mhz band to be auctioned, which would have amounted to a minimum payout of Rs18,000 crore for the 5Mhz across the country needed to start services by a new operator. Trai had said that the effect of the recommended reserve price will be around Rs0.05 per minute to consumers, something that telecom service providers say is impossible. The telecom operators stand by their calculations that the effect will be an increase of as much as 100% on current tariffs.

A senior DoT official said the ministry wants to reduce this to Rs12,000 crore.

The eGoM has been unable to take the key decision for more than a month now as the earlier chairman, former finance minister Pranab Mukherjee, resigned in order to file his nomination for the coming presidential elections. Subsequently, Prime Minister Manmohan Singh appointed agriculture minister Sharad Pawar as the head, but he recused himself from the position on the grounds that he did not want to be dragged into the ongoing investigations into the allotment of 2G spectrum.

shauvik.g@livemint.com