Telecom investment to get a fillip as Trai sticks to its guns

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Summary* Combined impact of 60% cut in auction base price, 100% FDI & liberal M&A norms

at 3% of the adjusted gross revenue of operators; and no reservation of spectrum in the 900 MHz band for incumbents.

Since the issues concerned are in the domain of policy the government has the power to change the recommendations.

The Telecom Commission is meeting on October 29 to consider the Traiís replies to its queries. Once a decision on them is taken by it, the matter will be taken by the empowered group of ministers headed by the finance minister P Chidambaram, following which the Cabinet will take a final decision.

Tentatively, the government plans to hold the auctions from January 8, 2014. Telecom minister Kapil Sibal, who had earlier welcomed the Traiís recommendations, later said at Express Goupís Idea Exchange programme that the queries of the Telecom Commission were procedural in nature.

The Trai has put up a strong defence for not recommending auctions in the 800 MHz band, currently used by CDMA operators. Rejecting the commissionís advise to suggest prices for the 800 MHz band, as auctions were necessitated by the Supreme Courtís order, Trai has said since two auctions had generated no response, the SC order has been complied with. It has also added that the SCís response to the governmentís presidential directive stated that natural resources should not be under-priced so selling the spectrum, which in propagation characteristics is similar to 900 MHz, below its value would in fact be a violation of the courtís order.

Similarly, on its recommendation that there should be uniform spectrum usage charge at 3% for all spectrum auctioned and for those allotted administratively the rate should be capped at 5%, Trai has said that the current, escalating slab system discourages merger and acquisitions and leads to arbitrage.

Responding to the commissionís query that it is legally bound to the current slabs ranging between 3-8% for mobile operators and a flat 1% for BWA operators, the regulator has said that Notice Inviting Applications allows the government to amend the SUC.

Reiterating its stand that no spectrum in the 900 MHz band should be reserved for incumbent holders like Bharti Airtel and Vodafone, the Trai has said that reservation would prevent the right discovery of price in the auctions and go against the principle of level-play. The commission had asked Trai whether it was legal for the authority to overturn an EgoM decision which allowed incumbents to hold on to 2.5

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