The telecom industry will cumulatively save over Rs 1 lakh crore due to the revised spectrum pricing proposed by the telecom regulator. The biggest gainers will be Airtel, Vodafone and Idea Cellular.

On Monday, the Telecom Regulatory Authority of India (TRAI) had recommended to cut reserve price for mobile spectrum in the 900 MHz and 1800 MHz band by 60 per cent and 37 per cent, respectively.

TRAI has also recommended lower spectrum usage charge at a flat rate of 3 per cent of annual revenues. Currently, operators pay 3-8 per cent of the revenues based on the quantum of spectrum they own.

Lowering the charges would be beneficial to older players that have higher amount of spectrum.

‘a welcome step’

Speaking to Business Line , Manoj Kohli, Joint Managing Director of Airtel, said, “This is a welcome step. TRAI has sent a message to all stakeholders that its time bring back telecom sector on the centrestage.”

Jaideep Ghosh, Partner, KPMG in India, said, “The recommendation of TRAI to lower the reserve price for 1800 MHz band is expected to improve the industry sentiments along with recent decision to open up 100 per cent FDI,” said.

While the industry is hoping that the Government accepts TRAI proposals on pricing, there are some concerns on the issue of one-time fee and spectrum re-farming. Incumbent operators have been told to pay a one-time fee for the spectrum they own beyond 4.4 MHz. While the fee will be lower due to the reduced base price proposed by TRAI, the incumbent operators have challenged the principle of having to pay mid-way into the business. The other major concern is that TRAI has not reserved any spectrum for incumbent players in lieu of the 900 MHz re-farming.

Operators have been given 20-year licences, some of which will expire in 2014. TRAI is of the view that the operators will have to buy back spectrum if they want to stay in business. The operators have challenged these policy decisions in courts.

Key risk

“TRAI’s recommendation of not reserving any spectrum in the attractive 900 MHz band for the existing operators is negative for GSM incumbents. However, the negative suggestion has come with a respite that minimum bidding in the 900 MHz band has been kept as 5 MHz, which may help participation by serious players only. As 900 MHz band auctions are not on a pan-India basis, the potential for disruptive bidding cannot be completely ruled out,” said research analysts at HSBC.

The key risk for GSM incumbents will be the participation in 900 MHz auctions by Reliance JIO which currently suffers from its spectrum holding in the 2.3 GHz band.

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