Trais recommendation is all the more interesting since, while demolishing CAGs estimates of losses last month, Sibal had said 2G spectrum handed out by Raja was just a third as efficient as 3G spectrum, so the CAG was wrong in calculating the losses based on the bids received in the 3G auctions. Sibal then reduced the CAGs loss estimate to a third on just this ground. Trais recommendations do not say 2G spectrum should be priced at a third of 3G, but theyre pretty closefor spectrum of less than 6.2 MHz, Trai has said a price of 53% of the 3G value should be taken.
Some of the older players like Vodafone, Idea and Aircel will benefit from the lower valuations put on 2G spectrum till a level of 6.2 MHz, as they have only 4.4 MHz in several circles (the biggest beneficiaries, of course, will be the 157 licences Raja issued). But most of them will also be badly hit. The initial lot of mobile licences for metros, for instance, will come up for renewal in 2014, the others will come up after that. So, the older telcos will have to renew licences at 1.4 times the 3G rates while the newer telcos will have licences at a fraction of these. Fortunes in the telecom space are all set to get reversed thanks to the Trai recommendations. Talk of policy-induced distortions.