TRAI's spectrum price recommendations evokes mixed reactions

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SummaryTRAI suggested a pan-India reserve price of Rs 1,496 crore per MHz in the 1800 band.

Telecom Minister Kapil Sibal today welcomed TRAI recommending reduction in spectrum base price for the upcoming auction while industry body COAI demanded still lower rates.

"We are very happy by and large with the positive nature of the recommendations...they are industry friendly and recognise the ground reality of the market...not only will government get its revenue but market will also be able to purchase spectrum at reasonable prices," Telecom Minister Kapil Sibal told reporters here.

The Minister also hailed the regulator's suggestion of allowing trading of spectrum acquired through auction.

"The one very positive recommendation of Trai is that they have in-principle said there should be spectrum trading," he said.

GSM industry body COAI said the reserve price could have been lower.

"We believe Trai is going in the right direction but we think what Trai has set as the reserve price is close to the market price of 1800 MHz and as per international standards, the reserve price should be 30 per cent of the market price," COAI Director General Rajan S Mathews told PTI.

He, however, said the biggest miss in the recommendations is spectrum refarming, which puts the incumbent operators in a high risk proposition.

There is no provision for the existing players wherein they can retain some amount of spectrum in the 900 Mhz band, Mathews said. "This is a high risk proposition for the incumbents," he added.

Videocon said the recommendations reconfirm the fact that the reserve price fixed for the November 2012 auction was wrong and those who bid have paid prices which are exorbitantly high.

The company said there is every possibility that the successful bid price of the spectrum in the current auction may not even touch the reserve price of the November auction.

"We strongly recommend that the excess money paid by us i.e difference between the price paid by us and the successful bid price of the upcoming auction should be refunded back to us either in monetary terms or through additional spectrum," Videocon Mobile Services Director and CEO Arvind Bali said.

The Telecom Regulatory Authority of India (TRAI) suggested a pan-India reserve price of Rs 1,496 crore per MHz in the 1800 band, down from the base price of Rs 3,640 crore in the previous auction.

COAI's Mathews supported TRAI recommending a flat rate of 3 per cent as spectrum usage charge (SUC).

Industry body AUSPI, which represents CDMA and dual technology players, termed the recommendations as a mixed bag.

"Recommendations are a mix bag as far as AUSPI is concerned. We are happy that there will be no reservation for renewal of licences in 1800 MHz and 900 MHz band, this means full refarming will happen," AUSPI Secretary General Ashok Sud said.

Sud, however, said there is major negative recommendation that 800 MHz band should not be auctioned, which means CDMA operators who want to add more circles or could have increased their spectrum holding for latest technologies at a reasonable price will not be able to do it.

"It is a death warrant for companies like MTS which has operations in nine circles," he added.

Consultancy firm KPMG said a lower reserve price for 1800 MHz band is expected to improve the industry sentiments.

"However, the concerns of winners who acquired spectrum at higher prices in the recent auctions would need to be addressed," KPMG Partner Jaideep Ghosh said.

He added the recommendation on full re-farming of the 900 MHz spectrum would impact individual operators differently based on their market entry timing and existing spectrum holdings in different circles.

Deloitte Haskins & Sells also welcomed the reduction in reserve price, however, it said the government should consider starting with the floor price at zero and let the market decide the final price.

"We still believe that the DoT/ Govt should consider starting with the floor price of zero and let the market forces decide the final price for the spectrum," Deloitte Haskins & Sells Partner Hemant Joshi said.

NGO Telecom Watchdog's Secretary and co-petitioner in 2G spectrum case, Anil Kumar said that new reserve price is much lower than the rate at which the spectrum of 800 MHz was awarded in the March 2013 auction.

"Sistema Shyam won the spectrum in 800 MHz band for Rs 360 crore per MHz in Delhi whereas Trai has now fixed just Rs 288 crore per MHz in 900 MHz band as the reserve price. This will not only cause substantial revenue loss to the government but also disturb the level playing field especially amongst the new players," he said.

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