FE Editorial : Markets matter

The base price fixed by Trai, under an earlier chairman last year, was based on the prices fetched in the 3G auctions of 2010—and this, in turn, was jacked up several times by putting in a multiple to work out the base price of spectrum in the 800 and 900 MHz bands. But this was always a bad idea. For one, the 2010 auction was a constrained one since, thanks to A Raja’s shenanigans, the older telcos had no spectrum to continue operations—after the 3G bids, where they bid through their nose, the telcos had enough spectrum; more got freed up as they started shedding non-paying customers. More important, the bottom fell out of the telecom market when, along with overall economic conditions plunging, average revenues per user began a steady climb downwards—from R180 per subscriber per month in Q1FY11, they fell steadily to R150 in Q2FY13. In such a situation, it never made sense to be looking at 2010 auction prices as

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