2G spectrum up to 6.2 Mhz to cost 53% of 3G; beyond, 136%

Written by Rishi Raj | New Delhi | Updated: Feb 9 2011, 08:15am hrs
The Telecom Regulatory Authority of India (Trai) will announce its recommendations on differential pricing for 2G spectrum on Wednesday. Essentially, 2G spectrum up to 6.2 Mhz will be priced at 53% of 3G spectrum price (arrived at through auctions) while beyond 6.2 Mhz, it will cost 136% of 3G rates.

Spectrum will not be priced uniformly, but will be based on the circle and the amount of Mhz. This means that the price of spectrum, say in Uttar Pradesh on a per Mhz basis, will vary from that in Delhi. The team of technical and commercial experts who conducted a detailed study for Trai based on certain models found that opportunity costs are different in different circles; so, there cannot be an all-India uniform price.

The recommendations will stick to Trais own May 11, 2010, suggestion that auction is currently not feasible in 2G. However, it is going to say that once the government cancels the 69 licences which did not meet rollout obligations as recommended by it last November, the government will get 277 Mhz. This will enable it to provide up to 8 Mhz spectrum to all existing operators. Even after this, some will be left. It is this spectrum which can be put up for auction and once thats done, the price discovered through auctions will become the final 2G price.

For spectrum up to 6.2 Mhz, the average price comes to Rs 1,769.75 crore per Mhz. This ranges from Rs 7.6 crore per Mhz on the lowest end for J&K circle and Rs 187.38 crore, the highest for Tamil Nadu.

Similarly, for spectrum beyond 6.2 Mhz, the average cost of 2G spectrum on an all-India basis will come to Rs 4,571.87 crore per Mhz. On the lowest band, this will be Rs 22.89 crore per Mhz in J&K and Rs 431.95 crore per Mhz in Andhra Pradesh.

The telecom regulator will clarify that these prices are applicable from 2010 onwards and not for 2008 when the controversial licences were given out by former telecom minister A Raja. However, current telecom minister Kapil Sibal has said that he will charge for additional spectrum beyond 4.4 Mhz only. This means the per Mhz cost worked out by Trai will have to be paid by new operators like Uninor, Etisalat, Loop, Reliance GSM and Tata Teleservices GSM. Incumbents like Bharti, Vodafone, Idea and state-owned firms like BSNL and MTNL will pay the price on per Mhz and circle basis on the charges now worked out by Trai for spectrum they hold in excess of 6.2 Mhz.

As is known, Trai had come out with a 2G spectrum pricing report on May 11, 2010 which had basically linked 2G spectrum in 1800 Mhz at 1.3 times the 3G price. However, the Trai had then said that simply linking the 2G price to 3G price is not proper and a separate exercise would be conducted by it to come to a final pricing.

The CAG had taken this as the basis for working out the Rs 1.76-lakh crore presumptive revenue loss to the exchequer due to Rajas move of not auctioning 2G spectrum in 2008. Sibal, however, had debunked CAGs calculation stating that 2G spectrum cannot be priced more than 3G since the latter was more efficient.

S-band contract with Devas cancelled

The government has decided to annul the 2005 contract signed between the Isros commercial wing Antrix and private sector Devas Multimedia for lease of transponders in two yet-to-be-launched satellites, following reports that the deal gave the company rights to use 70 Mhz of scarce

S-band spectrum. Department of space secretary and the current Isro chairman K Radhakrishnan told reporters in New Delhi that the Space Commission, which reviewed the deal, had decided to terminate the contract last July itself.

No revenue lost, says PMO; BJP differs

The PMO said there was no revenue loss in the S-band case, since no spectrum was allocated yet. The BJP, however, said the government is indulging in sophistry.