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Spectrum moves from standoff to tradeoff formula

The Empowered Group of Ministers (EGoM) headed by home minister P Chidambaram mulls higher user charges to offset reserve price cut for auction; large industry players cry foul. HT reports Revenue-share: Matrix reloaded

india Updated: Jul 18, 2012 22:13 IST
HT Correspondent
HT Correspondent
Hindustan Times

The Empowered Group of Ministers (EGoM) headed by home minister P Chidambaram on Wednesday moved to ease a standoff between the telecom regulator and industry players by calling for options that would slash the auction-based spectrum price in exchange for increased spectrum usage charges (SUC) as a percentage of revenue.

However, leading industry players slammed the latest proposal, saying it would unfairly penalise established players because their revenues are much higher than that of recent entrants.

The Telecom Regulatory Authority of India (TRAI) had recommended a reserve price of Rs 18,000 crore for 5 MHz in the 1,800 MHz band. The EGoM is mulling a cut in this while increasing the spectrum charge from the current 3% of adjusted gross revenue (AGR) proposed by the regulator.

The EGoM on Wednesday asked the department of telecommunications (DoT) to work out a matrix of options to suggest increases in the SUC rate that would protect government revenues in exchange for a cut in the reserve price in units of Rs 1,000 crore below the current reserve price.

The DoT will submit is report on Friday, when the next EGoM meeting is scheduled.

The TRAI has projected that the government can earn up to Rs 690,000 crore from the auction revenues, renewal fees and SUC over the next 20 years.

The Cellular Operators Association of India (COAI), representing GSM players such as Bharti Airtel, Vodafone, Idea and Aircel, opposed the EGoM move.

“It is a bad idea,” said Rajan S Mathews, director-general of COAI. “This will create uncertainty as at the time of bidding the players do not know what would be the SUC. There is a possibility of arbitrage as the SUC for voice is different from that for data.”

Arbitrage refers to selling at high prices after buying at low rates. COAI officials say revenue earned from spectrum procured in the latest round could be shown as revenue earned from the spectrum acquired in the previous round in 2010 at a lower spectrum user charge rate of 1%.

He also said that operaters with higher revenues would be punished for their efficiency by being made to pay higher user charges.

The Association of Unified Telecom Service Providers of India (AUSPI), which represents dual technology (GSM/CDMA) providers, mainly Reliance Communications (RCOM) and Tata Teleservices, welcomed the EGoM's move. “It is a good move as long as it is not applicable to existing operators,” said SC Khanna, secretary general (AUSPI).

First Published: Jul 18, 2012 20:29 IST