The Empowered Group of Ministers has proposed lowering the reserve price for the spectrum to be auctioned.
While the telecom regulator had proposed a base price of Rs 16,000 crore for 5 Mhz spectrum, the EGoM will recommend that the fee could range between Rs 14,000 crore and Rs 16,000 crore. In addition, the telecom companies will have to pay spectrum usage charge of 3-6 per cent of their annual revenues.
The EGoM has also agreed to allow the telecom companies to pay for spectrum in instalments.
While GSM operators will have to pay 35 per cent of their bid amount up front, CDMA players need to pay about 25 per cent. The operators will get a two-year moratorium on the balance payment after which it can be staggered over a 10-year period.
This is in line with the recommendations of the Telecom Regulatory Authority of India.
Although the Telecom Commission had decided against this proposal, the EGoM has approved it to appease the telecom lobby groups.
Telecom companies have been pushing for the staggered payment option to take the load off their balance-sheet.
The Group, however, did not take a decision on the one-time fee to be paid by incumbent operators.
The Department of Telecom has proposed a fee on all existing operators in order to level the playing field. According to the proposal, the fee will be based on the final bid price in the upcoming auction.
But, according to sources, the EGoM will first present all the options related to the upcoming auction to the Cabinet for a final decision in order to meet the Supreme Court set deadline. The apex court has asked the Government to complete the auction by August 31.
“EGoM discussed three specific issues — What should be the reserve price, spectrum usage charges and terms of payment? The EGoM is going to make specific recommendations on each of these issues to the Cabinet so that the Cabinet decides on it,” the Communications Minister, Mr Kapil Sibal, said after the EGoM meeting on Friday without giving details
Market watchers said that the price band of Rs 14,000-16,000 crore and deferred payment terms were moves in the right direction as the amount has been reduced by 25 per cent from the earlier Rs 18,000 crore.
“Still, the amount is very high compared to the amounts paid by the operators previously. Considering the number of bidders and the very limited spectrum made available for auction, this would lead to price higher than the base price,” said Mr Hemant Joshi
“Deferred payments terms would definitely reduce the borrowing cost of the operators. However, if the spectrum usage charge are increased to make up for the reduction in the auction reserve price then all the benefits mentioned above would go away,” he added.
Companies to wait
Telecom companies declined to comment and said they would await the final decision by the Cabinet. Mr Rajan Mathews, Director-General, Cellular Operators Association of India, said that even with the reduced base price, the tariff could go up by 40 paise a minute.