The department of telecommunications (DoT) has decided to determine the price of 2G spectrum through auctions and hopes to get the finance ministry’s support for the same. Also, it agrees to the finance ministry’s proposal that the one-time fee on operators holding excess spectrum beyond 6.2 Mhz should be charged on a retrospective basis, i.e. from the date of allocation rather than on prospective basis (on remaining tenure of their licences).

DoT decided this after finding faults with the recommendations by Trai, which had suggested linking 2G spectrum prices to 3G and putting a figure of Rs 1,769 crore for per mega hertz spectrum up to 6.2 Mhz and Rs 4,571 crore beyond it. Trai had also recommended that the one-time charge should be on a prospective basis.

DoT is also agreeable on the finance ministry’s formula of computing the extra charge by taking into account the prime lending rate of the State Bank of India compounded on a monthly basis since the extra spectrum was allocated. The base would be Rs 1,650 crore, which is the price discovered through auctions in 2001. This would then roughly come to around Rs 4,250 crore for per mega hertz of spectrum. The idea is to make this the base price and then conduct auctions to determine a market-discovered price.

A final discussion on the proposals and then a decision is expected at the meeting of the Telecom Commission on December 26.

Apart from telecom secretary, who chairs the commission, finance secretary and DIPP secretary, who are also members of the commission, would be present at the meeting.

Sources said the Telecom Commission at its meeting on December 9 unanimously decided to not go by Trai’s 2G

spectrum pricing formula since it felt that the proposed prices were based on the assumption that the spectrum should be charged on the basis of tele-density.

?Trai’s recommendations have priced 2G spectrum beyond 6.2 Mhz at just 37% of the 3G price in Delhi while the 2G spectrum in a circle like West Bengal has been priced at 877% of the figure. This is based on the fact that Delhi and Mumbai have already reached more than 100% tele-density and the operators don’t stand much business in these circles, while C circles such as MP and West Bengal with low tele-density have a much better business prospects,? a DoT official said.

On the issue of mergers and acquisitions, DoT feels

that while amalgamations which results in an entity with less than 25% of the total

spectrum in the concerned circle and has a market share of less than 35% should be put under the automatic route as proposed by Trai.

However, the DoT official said, ?The regulator has said any M&A in which the resultant entity has a market share of more than 35% and up to 60% would be dealt with by the regulator, but DoT feels that the regulator should instead lay down guidelines for DoT on how to deal with these cases,? the official said.