Department asks Trai to reconsider pricing for excess spectrum holders.
In what could be a relief to Bharti Airtel, Vodafone and Idea, the Department of Telecommunications (DoT) has asked the Telecom Regulatory Authority of India (Trai) to reconsider its pricing recommendation for excess spectrum holders.
The regulator had recommended that companies having extra spectrum should be made to pay a one-time charge. The three telecom service providers are prominent private firms that have spectrum in excess.
A one-time charge in the case of Bharti Airtel would have been in the range of Rs 3,200 crore to Rs 4,400 crore, claim analysts. For Idea and Vodafone, they say this will be in the range of Rs 1,500 crore to Rs 2,000 crore each.
Bharti, which holds excess spectrum in 13 of its 22 circles, will have an FY12 cash outflow that will be the maximum (Rs 3,200 crore to %Rs 4,400 crore) if based on 3G auction costs in June 2010, says Nitin Soni, analyst from Fitch Ratings. “A lower charge will have a positive effect on Bharti’s cash flows,” he notes in his report.
PricewaterhouseCoopers believes DoT is trying to create a midway on the current pricing norm for telco players. “Telecom players have got spectrum at different prices over a period of years. And many have ended having spectrum over 6.2mhz,” says Sandeep Ladda, executive director of the global professional services firm. “Having said that, everybody who got that spectrum have paid for it.”
Analysts say the regulator’s response to DoT will now be in the context of the draft of the telecom policy 2011 released yesterday.
The telecom ministry has also sought clarifications on various points made by Trai on ‘Spectrum Management and Licensing Framework’, which will form the basis for spectrum allocation.
Trai had, on February 8 this year, recommended April 1, 2010, as the applicable date for charging the current price for spectrum allocated to GSM players in 1800-Mhz frequency band and CDMA players in 800-Mhz and 900-Mhz (GSM) frequency band.
The regulator said the current price may be charged from the date of allocation in 2008-09, but subject to the outcome of various court cases.
Trai recommended the concept of current price to determine valuation of spectrum in the frequency band, where auction can be done to determine price of spectrum. The current price is to charged for excess spectrum allocated to telecom operators beyond the prescribed limit, which in the case of GSM players is 6.2 Mhz and is 5 Mhz in case of CDMA players.
Trai has said that no current price is to be charged from the existing operators for assigning spectrum up to 6.2Mhz in 1800 Mhz band and up to 5 Mhz for CDMA during the validity of existing licences held by them. DoT has also asked Trai to reconsider its pricing formula.
“Across the board applicability of assumptions made by Trai for arriving at the proposed pricing formula is not evident,” said DoT. “The appropriateness of the spectrum pricing suggested by Trai, in cases where auction is not feasible, needs to be re-examined.”
