The spectrum allocation policy for mobile telephony that caused a corruption scandal and then an industry-government gridlock is set to change all over again with the industry regulator setting in motion recommendations for a new regime. For consumers, it means tariff increases are unlikely.
The Telecom Regulatory Authority of India (TRAI) on Monday proposed upto 80% cuts in minimum auction prices for mobile phone spectrum as authorities made a fresh attempt to sell radio waves after two abortive rounds when carriers stayed away citing high prices. The regulator also allowed trading in extra spectrum held by telecom operators.
The proposed new prices challenges national accounting watchdog Comptroller and Auditor General (CAG)’s methods to calculate government’s potential revenue losses — Rs. 1.76 lakh crore — when it allotted 2G spectrum in 2008 through a controversial first-come, first-served policy that later resulted in a political uproar with allegations of corruption based on arbitrary allocation.
The new set of spectrum-bidding rules, which will now have be vetted by the telecom department and the Union Cabinet, will likely be welcomed by incumbent operators such as Bharti Airtel and Vodafone.
In the wake of the 2G scam, the Supreme Court in an order last year had cancelled 122 telecom licences and ordered auctioning off spectrum that the government had allotted in 2008.
However, two rounds of bidding in November and March had come unstuck hit by a cold response from companies that had said prohibitively high prices could force a sharp rise in telecom tariffs, eventually hurting consumers.
A successful selling of radio spectrum is critical for the government’s fiscal calculations in an election year amid a widespread economic deceleration.
The government has budgeted to earn `40,847 crore from spectrum auction and telecom licence fees in 2013-14.
In July, the government had asked TRAI to recommend new minimum bid prices.When asked if the previous minimum prices were too high, Rahul Khullar, chairman of TRAI, said, “Short answer: ‘yes’. The approach has completely changed from the previous pricing regime.”
Telecom Minister Kapil Sibal said the recommendations are reasonable and in recognition of market realities. “Not only will the government get its revenue but the market will also be able to purchase spectrum at reasonable prices so that the long-term impact on the market and on the telecom sector is positive.” Sibal added.
For the 1800 Mhz frequency band that are used for basic mobile services, TRAI has recommended a new reserve price of `1,496 crore per MHz, a cut of 60% compared to its previous suggestions. The regulator has slashed the proposed spectrum auction reserve price in 900 MHz band in Delhi, Mumbai and Kolkata by about 79 % to `650 crore per MHz against `3,074.18 crore per MHz earlier.
The regulator has proposed that incumbent operators such as Bharti Airtel and Vodafone should not be allowed to carry over existing spectrum in the more efficient 900 MHz band by default and instead will have to buy these through bids.