Trai proposes relief for CDMA cos
The telecom regulator on Sunday proposed to reduce the reserve price of CDMA spectrum but made no change in its price recommendation for GSM spectrum auction.
The Telecom Regulatory Authority of India (Trai) suggested a cut in the reserve price of CDMA spectrum from twice to 1.3 times the base price recommended for the 1,800 MHz band. The reduction, however, will be valid only in states where airwaves less than 5 MHz are available for auction.
Trai’s earlier proposal of charging 3,622 crore per unit spectrum to GSM operators in the upcoming auction and re-farming the 900MHz and 800MHz bands remains unchanged.
This could offer some relief to CDMA spectrum-holders Reliance Communications, Tata Teleservices and Sistema Shyam. Operators, who would have had to start bidding at 7,244 crore per MHz, can now start bidding at about 4,700 crore per unit.
Outgoing Trai chairman JS Sarma has increased the spectrum usage charge to 3%, from the earlier proposal of 1% of the telcos’ gross revenues, which he believes would increase savings for the telecom sector. “The amount of savings on account of 1% spectrum usage charges (SUC) will be around 68% of the total amount of the renewal fees, which will be paid by the entire industry.
However, if the SUC is fixed at 3% instead of 1%, this figure reduces to around 31%, which still gives a reasonable discount,” he said in the recommendations and added that the move would not have any adverse effect.
Hemant Joshi, Partner, Deloitte Haskins & Sells, said that this particular proposal could only worsen the situation for telcos. “Trai has suggested increase in spectrum charge, this will put greater pressure on already cash-strapped operators. The reserve price is lowered (for CDMA operators),” he said.
The regulator has also proposed to auction balance spectrum in the 1,800MHz band within this financial year, after auctioning the 800MHz band. It had earlier indicated auctioning in the first half of 2013-14.
Reiterating that auction of 5MHz airwaves would be open to all players, Trai has, however, suggested that after auctioning the first lot of 5MHz, a second lot of equal spectrum units in the 1,800 MHz band will be made available where the frequencies are available. However, this must be done after keeping airwaves for re-farming and a block for one operator.
Largely, continuing with its earlier recommendations issued on April 23, Trai has not changed many of its proposals.
The regulator has maintained that its calculations on reserve price neither “adversely impact the profitability” of operators nor the entry of new operators, while adding that the impact on call tariffs for customers would be 4 paise per minute or lower.
“This can be either absorbed by the service providers from the additional minutes that are generated or recovered through charges for different retail and wholesale services,” the regulator said.
GSM and CDMA operators have been clamouring for a lower base price for the auction, as higher base price would lead to doubling of call tariffs for consumers since they would not be able to absorb any costs.
The regulator has not changed the reserve price of 3,622 crore per unit of spectrum for GSM operators, which would mean that any telco would have to cough up 18,111 crore for a pan-India permit, a licence for which they had paid 1,659 crore when former telecom minister A Raja had dished out these permits in 2008, which came bundled with 6.2 MHz of spectrum.
An analyst with an MNC brokerage said: “Setting reserve price has become political. The government is better positioned to take that decision by keeping Trai headless.”
In a 59-page response to the department of telecom, Trai has urged it to consider installment-linked payment over a period of 12 years against paying all up-front and allowing mortgaging of spectrum to financial institutions after taking a view from ministries of law and finance.
While providing reasoning for all its proposals, the regulator has maintained that refarming of 900MHz and 800MHz spectrum bands be done without any further delay.
Trai had earlier endorsed the demands of Reliance Industries-owned Infotel Broadband and RCom that the 900MHz band, considered the most cost-effective for 2G services, and currently used by Bharti, BSNL and Vodafone along with Idea and Aircel in some circles, be redistributed or refarmed among all operators in the upcoming 2G auctions.
It has also maintained that telcos would have to pay for liberalised use of spectrum. The regulator’s proposals come after the Supreme Court had ordered it to devise a method to auction 122 mobile permits that belonged to nine telecom companies it cancelled on February 2 this year.
Following the recommendations, the Empowered Group of Ministers will take a final call on whether to reject, accept or modify these proposals.