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An inter-ministerial panel, set up by Communications Ministry to look into 2G auction policy, has indicated that it is not in favour of allowing operators to make deferred payment or mortgage spectrum.
All the members of the panel in its last meet held this week have conveyed their opposition to the proposal. If the panel's views are taken on board, it will make it even more difficult for operators to buy spectrum.
The Telecom Regulatory Authority, while pegging a 10 times higher base price for 2G spectrum, had recommended that operators be allowed to pay the bid amount over a 10-year period. The TRAI had also proposed to give a two-year moratorium. All this because the auction winners will have to pay a minimum of Rs 18,000 crore for buying 5 Mhz of pan-India spectrum in the 1800 Mhz band.
The regulator had also suggested allowing the telcos to mortgage the spectrum won through the auction in order to raise money from banks. However, the inter-ministerial panel took a view that there was no point in allowing operators to mortgage spectrum if spectrum trading wasn't permitted.
“It doesn't make sense to mortgage spectrum if it's not allowed to be traded because spectrum is an intangible asset. Lending banks need to leverage value through the mortgage,” said a senior Government official. The TRAI has proposed only limited spectrum trading.
The official added that it was decided to consult the Department of Financial Services before taking a final decision on the issue. The panel was constituted by the Communications and IT Minister Mr Kapil Sibal in March to look into 2G auction policy. The committee has representation from Department of Commerce, Department of Industrial Policy and Promotion, Department of Economic Affairs, Planning Commission and Department of Telecom.
Telcos said the base price itself was so high and if deferred payment is not allowed then it is unlikely that any operator will be able to bid.
The GSM Association, which is an international industry body, stated that the TRAI's recommendations will set India back in its goal to deliver “Broadband on Demand”.
The proposals disregard international best practice in spectrum policy and jeopardise the investment of billions of US dollars in new mobile infrastructure in a sector that either directly, or indirectly, employs almost 10 million people and serves more than 911 million consumers, it said.
“Efforts to squeeze money out of mobile operators for some perceived short-term gain will only reduce investment in networks, inhibit growth of mobile services and drive up consumer prices – limiting the value the public will derive from the spectrum resource in the long term,” said Mr Franco Bernabè, Chairman of the GSMA and Chairman and CEO of Telecom Italia Group.
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