The spectrum allocation policy for mobile telephony, which caused a political uproar and an industry-government gridlock is set to change all over again.
The empowered group of ministers (eGoM) on Friday cleared the proposed new reserve prices, which are up to 25% higher than the prices cleared by sector regulator Trai, but lower than the failed auctions of last November.
A successful sale of spectrum — radio waves used in wireless telecom — is critical for the government: it has budgeted Rs. 40,847-crore receipts from spectrum auction and telecom licence fees in 2013-14.
The tricky bit, however, would be the impact on tariffs. Two rounds of bidding in November 2012 and March had fizzled out due to cold response from telcos, which had said prohibitively high prices could force a sharp rise in tariffs.
“The reserve price determined for 1800MHz and 900 MHz spectrum is high in our opinion,” said Mohammad Chowdhury, leader-telecom, PwC India. “This, and uncertainty over CDMA spectrum pricing, pending M&A guidelines, and rupee instability, will determine interest in the auction.”
The next round of auction is slated for January 21 and 22.
Telecom spectrum allocation became controversial after the CAG said in 2010 that the government may have lost potential revenues of Rs. 1.76 lakh crore when it allotted 2G spectrum in 2008 on ‘first-come, first-served’ basis.
The Supreme Court last year cancelled 122 licences and ordered auctioning of the spectrum allotted in 2008.
The new reserve prices are in line with telecom commissions. The base price for 900 MHz, the more efficient band that incumbent operators Bharti Airtel and Vodafone use, will cost a minimum of Rs. 360 crore per MHz for Delhi, Rs. 328 crore for Mumbai and Rs. 125 crore for Kolkata — 25% higher than Trai’s recommended prices.
But some experts said these prices may further strain the debt-ridden industry.
“The government should consider the financial position of the sector before taking a decision on pricing. And these are only base prices; market forces and demand would finally decide the price paid by telecom companies,” said Hemant Joshi, partner at consulting firm Deloitte Haskins.