The finance ministry has asked the department of telecommunications (DoT) to double the reserve price for pan-India 3G auction to Rs 4,040 crore from the current Rs 2,020 crore. It has also asked broadband wireless access (BWA) reserve price to be doubled to Rs 2,000 crore.
The move assumes significance since by now it is clear that no new, foreign telecom major is going to participate in the 3G spectrum auction, which has been postponed to January 30 from the earlier date of January 16. The government therefore wants to garner the highest possible revenue from the existing operators who all are sure to bid for 3G spectrum. However, now there?s every possibility that the auctions would be further postponed.
The finance ministry has also asked the DoT to bring the matter to the Cabinet after incorporating the revised reserve price. The issue may throw up a slight problem since any revision would require the matter to be referred to the Telecom Regulatory Authority of India (Trai).
The Cabinet Committee on Economic Affairs (CCEA) is also slated to look at the Trai proposal of levying an administrative charge of 2% on the highest bid on a recurring basis, which has subsequently been rejected by the telecom commission, the apex policy-making body of the DoT.
The Rs 2,020 crore reserve was also increased by DoT than what was earlier recommended by the Trai. Trai had suggested a reserve price of Rs 80 crore for metro and A circles, Rs 40 crore for B circles and Rs 15 crore for C circles. The DoT increased it to Rs 160 crore, Rs 80 crore and Rs 30 crore respectively. If the finance ministry?s proposal is now to be accepted these would need to be doubled.
The government was earlier looking to garner around Rs 40,000 crore from 3G spectrum auction. However, due to dim business prospects coupled with the international financial meltdown, DoT had revised the estimate downward to around Rs 30,000 crore.
If the revised reserve price comes into play roughly the government could earn is around Rs 60,000 crore. Keeping the current reserve price scenario a player bidding for pan-India 3G and BWA would have paid Rs 3,020 crore. If the reserve price is hiked as per finance ministry?s proposal then the same goes up to Rs 6,040 crore. In the earlier scenario, the industry estimate was that the final 3G bid would be in the range of Rs 7,000-8,000 crore, which would go up to around Rs 11,000-12,000 crore.
Telecom industry officials expressed concern at raising the reserve price stating that the government should not only look at garnering revenue from the sector since it is doing well. If the business case of the players gets affected revenue growth would get impaired, they said.
As reported by FE earlier, though the telecom industry is posting growth, the rate of growth slowed down in the second quarter and the trend is expected to be maintained in the remaining two quarters. In fact, the Trai will be holding a meeting with the players on the issue later this month.