 "Telecom Commission meet on spectrum pricing today")
The industry, which had welcomed the Trai suggestions, privately admitted the committee's proposal, if accepted, might put the industry back in a financial mess.
The committee has offered a few alternatives. First, the pan-Indian reserve price be based on the market-determined price of spectrum in 18 circles, auctions for which were held in March 2013, and the last reserve price fixed in the four circles of Delhi, Mumbai, Karnataka and Rajasthan, where no spectrum was sold. Based on this, the value of one MHz of pan-Indian 1,800-MHz spectrum would come to Rs 2,378.52 crore, 37 per cent higher than Trai's suggestion of Rs 1,496 crore.
Also Read
The second alternative, the Department of Telecommunications (DoT) committee had said, was that the reserve price be based on extrapolation from the 2001 market-determined price of the four circles in which spectrum wasn't sold, apart from the market-determined price for the other 18 circles. Based on this, the price of one MHz pan-Indian spectrum will be Rs 2,203.43 crore, 47 per cent more than the Trai-recommended price.
The committee also suggested the Trai recommendations be considered, though it had clearly said the price determined by the regulator was too low.
Besides, the committee has rejected the regulator's recommendation that an extended GSM band of 800-MHz spectrum be auctioned, as this would fetch three-four times the amount CDMA operators would pay. To say CDMA technology was dying wasn't appropriate, the internal committee said, adding there were uncertainties in carving out an extended GSM band. The 800-MHz spectrum should be auctioned as decided earlier by an empowered group of ministers, it said.
Trai hadn't recommended any base price for the auction of the 800-MHz band. The pan-Indian reserve price for one MHz of 800-MHz spectrum was Rs 1,820 crore in the March auction.
The committee has suggested two ways of deciding the reserve price - it could be based on the price fixed in the earlier auction, or it could be deduced from the 1,800-MHz price (finalised with a multiplying factor of 1.3, with the final number being halved, as was the case in the March auction, in which Sistema was the only participant). It added, for the Rajasthan circle, an additional discount of 30 per cent in reserve price, according to Trai's recommendations, didn't appear to be justified.
On the contentious issue of imposing a uniform spectrum usage charge (SUC) of three per cent recommended by Trai, the committee suggested the regulator's proposal be delinked from the auction of spectrum, for which the current SUC might be used. Operators pay one-eight per cent SUC, depending on their spectrum holding. The committee said a revenue-neutral, uniform SUC should be determined, after which the licensor might alter the SUC, according to the provisions of its licence agreement. It added frequent changes in rates weren't desirable at this stage, as investor confidence was vital.
It said the reserve price for 900-MHz spectrum would be double the 1,800-MHz base price, as was the case earlier. Though renewal for some operators with 900-MHz spectrum in Mumbai, Delhi and Kolkata would be due in November 2014, these operators had moved various courts against this, the committee said.
The two options suggested by the DoT committee
> Option 1
Pan-Indian reserve price be based on market-determined price in 18 circles, auctions for which were held in March 2013, and the last reserve price fixed in Delhi, Mumbai, Karnataka and Rajasthan, where no spectrum was sold
- Cost: Rs 2,378.52 cr
- Trai's suggestion: Rs 1,496 crore
- Difference: 37%
The reserve price be based on extrapolation from the 2001 market-determined price of the four circles in which spectrum wasn't sold, apart from the market-determined price for the other 18 circles
- Cost: Rs 2,203.43 cr
- Difference from Trai's suggestion: 47%