Telecom Lead India: TRAI’s proposed higher-than
expected auction base price for auctioning 2G and 4G spectrum invited
The higher base price is depressing for India’s telecoms
industry, as it will impact operators’ future earnings.
TRAI recommended the reserve price for the 1800 MHz
spectrum at Rs 3,622 crore and that for 900 MHz at Rs 7,244
crore. For the 900 mega hertz band, the telecom regulator has proposed a
base price at Rs 7000 crore, which is twice the base price set for a 3G
spectrum. For 700 megahertz band, it has been set at Rs 14,000 crore which is 4
times the 3G reserve price.
TRAI has also suggested this 5MHz of spectrum be auctioned
in blocks of 1.25MHz, making it almost impossible for a new operator or an
operator with a (soon-to-be) cancelled licence, due to the 2 February Supreme
Court verdict, to enter the market.
Telecom Lead selected few industry responses:
Tor Odland, spokesman for Telenor:
The immediate impression is that the auction format
proposed will have major negative consequences for the entire mobile industry
in India. The proposed base price for the auction of 2G spectrum is higher than
the 3G spectrum price set in 2010. The proposed base price will make telecom
operators to lose more.
Ashish Basil, Partner Telecom Practice, Ernst &
Reserve price for 5 megahertz of spectrum will be too
high for telecom companies. He also points out that with the new pricing new
companies may stay away from bidding.
HP Ranina, Corporate Tax Lawyer:
It is a very good scheme which they have framed and I am
sure the telecom companies also are going to be benefitted. The price will be
now determined by the market and with the price being determined by the market
I think everybody will feel that it is a fair deal just as it was done in the
case of the 3G spectrum.
Vodafone India spokesperson:
We believe that several of these recommendations are
retrograde, and if accepted will do irreparable harm to the industry. It will
hamper the ability to connect the unconnected and goes against the objectives
of the National Telecom Policy of ensuring improved rural teledensity and right
Hemant Joshi, partner at Deloitte Haskins and Sells:
The Indian telecom sector is reeling under
hyper-competition due to overcapacity, and is under cash strain due to high
prices paid for 3G spectrum and the capital-intensive nature of the industry.
If the new guidelines on spectrum are accepted by the government in totality,
then the business models by the incumbents and new operators would have to be
redrawn as operators would have to pay a significantly higher price for the
spectrum, which may ultimately lead to an upward revision in tariffs.
Jaideep Ghosh, partner at KPMG India:
The TRAI recommendations on the hike in reserve prices
appear significantly on the higher side and are likely to be a strain on the
resources of the bidders, especially with a highly competitive market
landscape. While the proposed auction is in blocks of 1.25MHz, this will be
inadequate to commence or continue operations. A higher reserve price and
resultant auction price are likely to lead to an increase in tariffs by service
While we study them in detail, it seems obvious that some
of these recommendations will create severe negative impact on the entire
industry. It is up to the political leadership of India to now ensure that the
gains of the past few years of affordable phone calls for India’s people are