To protest Trai?s 2G reserve price with boycott

Ahead of the impact analysis of the high reserve price set by the Telecom Regulatory Authority of India, mobile operators have opened channels with each other to present a united front to abstain from the forthcoming 2G spectrum auction.

The idea is to create a scenario where no operator participates in the upcoming auctions if the government does not lower the base price of R18,110 crore for spectrum in the 1,800 MHz band.

?Discussions are on to jointly abstain from the auctions if the reserve price is not realistically pegged,? an industry official confirmed.

If the operators are able to forge a united front on this aspect, it would not be without precedent. In 2001, when the government had conducted auctions for granting licences for inducting a fourth operator in circles, no bids came for the C circles like Bihar, Orissa and West Bengal because these were then not seen attractive enough considering the reserve price.

?Though back then there was no effort to jointly abstain from participating in the bids for the C circle with economics deciding the case for each player, this time around, apart from the economics, even if one player participates in the auction the price would become a reference point for later auctions,? the industry official said, explaining the rationale for forging a joint front.

Though GSM, dual-tech and new operators have differing stands on the various aspects of the recommendations by Trai, they stand united in their opposition to the high reserve price. This is because all of them get adversely affected by it.

But the telecom companies? bid to coordinate and keep away from the bidding process might run afoul of the Competition Act. Vinod Dhall, competition law expert and former member of the Competition Commission of India, said: ?If they (the telcos) jointly decide to abstain from the bidding, it could amount to colluding… this could prove to be in violation of Section 3 of the Act.?

For incumbent operators like Bharti Airtel, Vodafone and Idea Cellular, even if they do not participate in the auctions, they get affected because they would need to pay the auction-discovered price for the spectrum they hold when their licences come up for renewal two years down the line.

Dual-technology operators like Reliance Communications and Tata Teleservices get impacted because the department of telecommunications has floated a Cabinet note, which proposes that they also pay the auction-discovered price for the spectrum they hold for the balance period of their licences.

These operators get doubly hit because they hold CDMA as well as GSM spectrum and even though their licences come up for renewal much later, the payout would come now.

For new operators like Uninor, Videocon and Sistema Shyam, whose licences got cancelled by the Supreme Court?s February 2 order, the high reserve price acts as a barrier for re-entering the market.

Interestingly, the operators realised the need for jointly abstaining from the auctions when last month they met senior Cabinet ministers to present their case. A senior minister told them that they themselves had signed the 3G spectrum auction documents that had stated that the 3G auction price would become the base price for the next auctions. The 3G auction price came to around Rs 16,000 crore and going by that, Rs 18,110 crore as reserve price for the 2G spectrum auction now should be seen in that context.

?If there?s no participation, the government would have to lower the reserve price. But if even a single operator bids, then the price becomes the base price for future auctions. This goes against the demand-supply principle for fixing the reserve price,? said an official.

The Telecom Commission ? the highest decision-making body in the DoT ? has taken most of the decisions relating to the auction that needs to be completed by August 31 barring the reserve price. The empowered group of ministers (EGoM) has approved the decisions of the commission.

Trai has been asked to present an impact analysis of the reserve price on consumer tariffs, business case of the operators and government revenues, which is expected shortly. Based on it the EGoM would take a final decision on the reserve price.

However, the industry does not expect a revision of prices by the regulator, nor is it hopeful that it would say that its impact would be adverse for either consumer tariffs or viability of business. Hence the efforts at presenting a united move to abstain from the auctions.

Networking

* No operator would take part in auction if base price of R18,110 cr isn?t lowered

* GSM, dual-tech & new operators united in opposition to high reserve price

* Incumbent operators have to pay auction-discovered price for spectrum they hold

* For new operators, the high reserve price acts as barrier for re-entering the market