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Trai signals costlier 2G spectrum

New Delhi, Feb. 9: The telecom regulator has proposed a more than six-fold increase in fees charged for 2G spectrum — the air waves on which mobile phone calls travel — sparking fears that operational costs will spurt and magnify the problems operators are facing because of the intense price war in the industry.

The Telecom Regulatory Authority of India (Trai) has submitted a report to the telecom ministry that proposed a pan-India price of Rs 10,972.45 crore for up to 6.2 megahertz (MHz) of spectrum, or Rs 1,769.75 crore per MHz.

In comparison, the department of telecom (DoT) had issued pan-India licences bundled with 4.4 MHz of spectrum in January 2008 at a price of Rs 1,658 crore, or roughly Rs 377 crore per MHz. On that basis, the mark-up in Trai’s latest report amounts to roughly 370 per cent.

The report said that telecom firms would have to pay Rs 4,571.87 crore per MHz for spectrum beyond the initial limit of 6.2 MHz.

The fee rates for individual circles, in case a company picks and chooses circles instead of taking a pan-India licence, would vary depending on the circle chosen but would represent a steep hike over older rates (see table).

In a letter to the telecom secretary, Trai said it was against the auction of 2G spectrum because very little was available for sale. That is why it had suggested a fixed price for the scarce resource.

“If cancellations take place (the regulator had recommended the cancellation of 38 telecom licences after the recent uproar over the spectrum scam), the availability and requirement of spectrum would undergo a significant change,” it added.

The regulator’s proposals, which are not binding on the government, relate to the 1,800 MHz spectrum bandwidth given to new licensees from April 1 last year. Telecom firms, which were given spectrum before 2008, were mostly given air waves in the 900 MHz bandwidth.

Since 2008, the regulator has also been giving spectrum to existing GSM players in the 1,800 MHz bandwidth.

Sources said firms which got spectrum in the 1800MHz bandwidth some circles since April 2010 include Uninor, MTS, Videocon, Swan, S-Tel, Aircel, the Tatas and Reliance. Most of these firms had been allotted telecom licences and start-up spectrum before April 2010. However, they got spectrum in certain circles after April 2010 when the air waves were vacated by others.

However, this does not mean that those who managed to get extra spectrum, beyond the initial 6.2 MHz before April 2010 will get away without damages. Last May, the regulator had said that telecom companies should pay a one-time fee for holding spectrum over the initial 6.2 MHz given to them. Almost all telecom players, including BSNL, Vodafone and Bharti Airtel, hold excess spectrum.

Trai had also indicated that spectrum in the 900 MHz band should be priced 1.5 times that of 1,800 MHz.

The regulator also said that the renewal of existing licences should also be based on the new prices they have arrived at. All telecom licences in the country are granted for a period of 20 years.

The proposals come at a time the CBI is looking into allegations that former telecom minister A. Raja had defrauded the exchequer by doling out licences bundled with spectrum at a very low price to a favoured few.

The Trai recommendations have drawn widespread criticism. In a statement issued soon after the report was submitted, Vodafone Essar said it “disagrees with Trai’s new set of recommendations which are flawed and discriminatory against operators who were the first to invest deeply to build the sector”.

It said the proposals discriminated against GSM players such as Bharti and Vodafone and favoured dual technology operators such as Reliance Communications and the Tatas.

It estimated that Bharti would have to pay Rs 4,000 crore as a one-time fee while it would have to cough up Rs 1,743 crore. These figures could not be independently confirmed.

Bharti Airtel said, “For 2G spectrum pricing, Trai has in many cases (circles) gone beyond 3G values. For instance, up to 6.2 MHz, the price vis-a-vis 3G prices ranges from a low of 16 per cent to a high of 208 per cent. Beyond 6.2 MHz, it ranges from a low of 24 per cent to a high of 868 per cent. This defies logic.”

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