Telecom Commission fixes 2,100-MHz base price at Rs 3,705 cr

Telecom Commission raises reserve price 36% over Trai-suggested rate; Cabinet to take final call this week

Rejecting the recommendations of the Telecom Regulatory Authority of India (Trai), the Telecom Commission (TC) on Monday approved a base price of Rs 3,705 crore for each MHz of 2,100-MHz spectrum to be auctioned on February 25. This price is 36 per cent higher than the Rs 2,720 crore suggested by Trai. The Union Cabinet is likely to meet this week and take a final call.

At a meeting on Monday, the TC also reiterated its decision that only five MHz of spectrum in the 2,100-MHz band would be put up for auctioning in the coming round. Based on the reserve price, this will translate into a total earning of at least Rs 18,500 crore for the government. Since companies make an upfront payment of 25 per cent of the total, the immediate proceeds from the auction of 2,100-MHz spectrum will come to Rs 4,265 crore — in line with the government’s expectation of around Rs 5,000 crore from the band this financial year.

Trai, which had recommended a base price of Rs 3,408 crore a MHz for the previous 3G spectrum auction round in 2010, had reduced the suggested rate by 22 per cent for the coming round of auctioning.

Besides 2,100-MHz, airwaves in the 800-, 900- and 1,800-MHz bands will also be put on the block in February. The government expects this round of auction to garner a total revenue of Rs 80,000 crore to Rs 1 lakh crore.

A few weeks ago, the Union Cabinet had increased the base price for other bands as well — by 32.5 per cent over the Trai-suggested rate for the 900-MHz band; by 17 per cent for 800-MHz and by 2.4 per cent for 1,800-MHz.

The TC, the highest decision-making body in the department of telecommunications (DoT), had earlier rejected Trai’s recommendation on the 2,100-MHz base price and referred it back to the regulator. But Trai last week refused to change its suggested price and sent it back to DoT.

In its recommendations, Trai had also suggested that the government auction 5+15 MHz of 2,100-MHz spectrum in February. If this was not done, it had said, the prices would be exorbitantly high in the coming round of auction. It had suggested the government hold the auction simultaneously with other bands and specify a later date when the rest of the 2,100-MHz spectrum would be made available for commercial use.

Telecom operators, upset over TC’s Monday decision, shared the regulator’s concern. Cellular Operators Association of India (COAI) Director-General Rajan Mathews said: “Clearly, the government is thinking only about revenue maximisation. With only five MHz on offer, at least three incumbents will be battling for 2,100-MHz spectrum; the price will zoom. Worse, this high price will then become the base for the next round of auctioning, for 15 MHz of spectrum in this band. This policy might give the government short-term benefits but will be a disaster in the long run.”

Earlier, Communications and Information Technology Minister Ravi Shankar Prasad had said the government intended to auction only five MHz of 2,100-MHz spectrum in the coming round, and 15 MHz more when made available by the defence services.

The telecom and defence ministries have, in principle, agreed to a swapping arrangement for release of 15 MHz of 2,100-MHz spectrum by defence services in exchange for a similar amount of 1,900-MHz airwaves. But the government is keen on auctioning only five MHz in the coming round as talks for vacation of spectrum are still on and actual swapping might take some time.