Prospects for the telecom sector brightened on Friday with the government set to auction spectrum at a relatively low base price — almost 50% lower than the prices fixed during the March auctions. The government might soon allow telecom firms to pay a flat spectrum usage charge a move that will lower costs and encourage consolidation, telecom minister Kapil Sabil said, adding that these charges, together with the spectrum auctioned, would fetch R40,000 crore. Spectrum trading, which will give operators more 3G spectrum and boost data services, has also become a reality.
An empowered group of ministers (EGoM) on telecom headed by finance minister P Chidambaram endorsed the reserve price for auction in the 1800 and 900 MHz bands on the lines finalised by the Telecom Commission on November 6. These prices will need to be ratified by the Cabinet before the government readies to hold the auctions from January 21.
As reported earlier, the Telecom Commission had broadly gone along with the tlecom Regulatory Authority of India’s recommendations on the reserve price — it had increased the rates by 18% for 1800 MHz and 25% for 900 MHz spectrum band. In fact, in doing so the TC had basically converted the value of spectrum for each circle computed by the Trai as the base price. Trai had kept the reserve price at 80% of the value of the spectrum.
Though the newly drafted liberal mergers and acquisitions guidelines were not the agenda of the EGoM on Friday, it has allowed spectrum trading, which also has the potential to bring about consolidation in the crowded telecom services market. Trai will now frame the rules for spectrum trading.
The only area where clarity is needed and which would determine the course of the bids is with regard the uniform spectrum usage charge where Trai has recommended a flat charge of 3% for all spectrum bought through auctions and capped it at 5% in cases of mixed allocation.
The matter did not come up before the EgoM as the TC had said that discussions on the subject with the finance ministry is required before a