Vodafone asks govt to dump TRAI's report on spectrum pricing
Asserting that TRAI's latest report on spectrum pricing was fundamentally flawed, UK-based telecom giant Vodafone on Monday asked the government to reject the regulator's recommendations.
TRAI had in February recommended over six-fold jump in 2G spectrum prices and also a one-time charge for excess spectrum held by operators over and above the contracted 6.2 Mhz.
Going by this valuation, a pan-India licence would cost Rs 10,972.45 crore and an one-time fee of Rs 4,571.87 crore (all India) per Mhz of 2G spectrum in 1800 Mhz band.
Vodafone is a majority joint venture partner of India's third largest mobile operator Vodafone-Essar and offers services through out the country.
"We urge the government to ensure that the fundamental principle of regulatory review is undertaken and that the TRAI recommendations based on this flawed approach are rejected," Vodafone-Essar CEO Marten Pieters, said in a statement.
According to a study, commissioned by Vodafone, TRAI's Experts' Report is fundamentally flawed, contains basic errors and estimates contained in the report cannot be relied upon.
Vodafone commissioned a study prepared by Plum to provide a critique of the approach to valuing frequencies at 1800 MHz proposed in the report produced by four experts for the TRAI titled 'Report on the 2010 Value of Spectrum in the 1800 MHz Band'.
Phillipa Marks of Plum Consulting has referred to the TRAI report on the valuation of spectrum in the 1800 MHz band as "fundamentally flawed, contains basic errors and estimates contained in the report cannot be relied upon."
The study stressed on lack of transparency and incomplete disclosure of models used in Experts' Report and this is a serious concern that limits the research firms ability to provide a fully informed analysis of the report.
The study said that good practices, like pre-consultation discussions with major players, publishing consultation document covering method, information and results, were not followed by the regulator.
It said that asking questions on aspects of the findings and publishing documents giving decisions, including reasons and comments on how consultation responses impacted on decisions were also not followed.
"It is clear that the process in India falls a long way short of good practice in that there has been no consultation on the methodology or the information used to derive values," the study pointed out.
Neither the cash flow nor the cost reduction method proposed in the Experts' Report is of adequate rigour (in either methodological approach or in the data used) to provide reliable estimates of the value of spectrum.
It is not surprising, therefore, that the relative values obtained do not follow economic logic.
The study conclude that the approaches proposed in the Experts' Report should not be used to determine the market or opportunity cost value of incremental spectrum at 1800 MHz. The market value of spectrum can be directly observed through auctions or market trading of the spectrum concerned.
The market price can be estimated through an appropriate economic valuation methodology, it added.