Mobile companies will have to shell out significantly higher money for buying spectrum in future.
The Telecom Regulatory Authority of India on Monday suggested a base price that ranges between Rs 3,622 crore and Rs 14,480 per megahertz of airwaves. If these recommendations are accepted, the Government can hope to rake in at least Rs 7 lakh crore by 2014 by selling various chunks of spectrum bands.
The immediate impact of this will be on the new 2G players whose licences have been cancelled by the Supreme Court. These operators paid a total of Rs 1,650 crore for 4.4 Mhz of pan India spectrum in 2008. Now they will have to pay a minimum of Rs 16,000 crore for the same amount of spectrum.
The telecom regulator has suggested that auction for 2G spectrum should be done in a single phase open to all players, including incumbent players, which is contrary to what the new players wanted. But the TRAI has tried to strike a balance by suggesting that operators who already have maximum airwaves under the prescribed cap will not be able to buy more.
This will put the larger incumbent players like Airtel and Vodafone out of the race as they already have between 8 and 10 Mhz of spectrum in most key circles, which is the prescribed limit for GSM segment.
In order to make the payout less painful, the regulator has proposed to allow a two-year moratorium for auction winners with the option of paying 33 per cent of the bid amount initially and the balance over a 10- year period. The dampener however is that it has given the Government the freedom to impose a suitable interest rate in consultation with the Finance Ministry. TRAI said that spectrum should be sold in tranches of 1.25 Mhz with the operator allowed to acquire at least 5 Mhz in each circle.
For 700 Mhz band, the TRAI said that the auction can be held later in 2014 once the handset ecosystem develops. 700 Mhz band is used for offering Fourth Generation (4G) technology. The base price for this band has been pegged at Rs 14,480 crore per Mhz.
In 2010, the Government had fixed Rs 1,750 crore as the base price for 20 Mhz of broadband spectrum. Reliance Industries will stand to gain from this proposal as it can be the only pan Indian broadband player at least till 2014-15. This will hurt other players like Airtel who were looking to acquire more 4G broadband spectrum this year.
What will hurt the incumbent GSM players even more is that the TRAI has suggested immediate re-farming of 900 Mhz band. This frequency band is considered to be superior in terms of efficiency and capital investments.
At present this is being used by Airtel, Vodafone and Idea Cellular, which now the TRAI wants to take away once the initial licence expires (2014 onwards) and resell in the open market. Bharti's total liability will be around Rs 30,000 crore in 2013-15 to retain existing spectrum.
Not surprisingly, telecom companies blasted the recommendations and said that if implemented it will impact affordability.
“The TRAI's actions seem to be directed towards creating unnecessary constraints for the sector, overlooking the universal rules of sustainability and growth for this sector. Under such inconsistent, regressive and uncertain regulatory environment, it is inconceivable that the telecom industry, which is already in a state of doldrums, will be able to deliver on the Government's vision of affordable communications, rural penetration and rollout of data services,” said Bharti Airtel.