Trai links 2G prices with 3G; only RComm happy

In a set of recommendations widely seen as endorsing the 2G spectrum allocation process of 2008 and a setback for large telecom operators, the Telecom Regulatory Authority of India (Trai) on Tuesday ruled out the auction mode for allotting 2G spectrum, and said that operators holding spectrum above 6.2 MHz would have to pay one-time spectrum fees based on 3G prices.

Trai said that operators holding spectrum over 6.2 MHz up to 8 MHz would have to pay a one-time additional charge, at the current price of 3G spectrum. Beyond 8 MHz, the price would be 1.3 times the current 3G price. The payments would be on a prospective basis; that is, from the date the government accepts Trai?s recommendations. Bharti, Vodafone and BSNL hold 10 MHz spectrum in certain key circles, while Idea holds up to 8 MHz.

The recommendations ? which came as a blow for leading GSM players like Airtel, Vodafone, Idea Cellular and even the state-owned BSNL — shook up the share prices of these companies. On a day when the benchmark Sensex fell 1.09%, Bharti Airtel fell 3.11% to Rs 285.20, while Idea Cellular closed 5.31% down at Rs 59.70. State-owned MTNL hit a low of Rs 68.15, down 1.8%. Vodafone and BSNL are not listed companies.

Reacting to the recommendations, Tata Teleservices Ltd said: ?The recommendations of the Trai on 2G spectrum have not brought in the level playing field that Tata Teleservices Limited has been looking forward to, and has not addressed the inequalities in spectrum allocation and issues of excess spectrum beyond 6.2 MHz?.

Anil Ambani?s RComm was the only company to have welcomed the recommendations.

Syed Safawi, CEO, wireless business, Reliance Communications said, ? The recommendations have been progressive and will ensure spectrum efficiency in the telecom market. Also the recommendations will encourage rural telephony in the country. We have spectrum beyond 6.2 mhz only in Bihar circle and will have to pay a one time fee amounting to Rs 20 crore. For other incumbents the fee may run up to Rs 10,000 crore as they have excess spectrum in many circles?.

Reacting to the recommendations, the GSM industry?s apex body Cellular Operators Association of India said that the higher cost of spectrum could affect expansion plans, particularly in rural areas. ?Growth could be hampered,? said Rajan S Mathews, director-general, COAI.

On a macro level, the recommendations ? which were expected to be a clean-up of the messy 2G telecom space ? fell far short of expectations, leaving much to be decided later by the government or the regulator.

Ruling out auctions for 2G spectrum award amounts to a virtual clean chit for telecom minister A Raja?s 2008 spectrum allocation, which is currently facing a CBI investigation. In January 2008, 2G spectrum and licence were allocated to a handful of companies at Rs 1,651 crore per applicant, a price level set seven years earlier.