CEOs of telecom companies had another round of meetings with the Union Communications and IT Minister, Mr Kapil Sibal, and urged him to reject the TRAI report on spectrum pricing on multiple grounds.
The operators told Mr Sibal that mobile call rates would double in some circles if the recommendations of the telecom regulator on spectrum pricing are accepted.
Price rise in tariffs
“There will be circles which will have more than a 100 per cent price rise (in tariffs) if they were to absorb the impact of what is being recommended,” the Bharti Airtel CEO, Mr Sanjay Kapoor, said after the meeting. “In one circle, the cost of spectrum, the reserve price is Rs 7 crore and on other end, there are metros where it is Rs 717 crore, which is a 100 times differential,” he said.
The chiefs of Bharti Airtel, Vodafone India, Idea Cellular, Uninor and Videocon met Mr. Sibal and the Department of Telecom Secretary, Mr R. Chandrashekhar, to discuss the implications of TRAI recommendations.
Top officials of CDMA operators Sistema Shyam Teleservices, Reliance Communications, Tata Teleservices and CDMA body AUSPI also met the Minister earlier in the day on the same issue.
Meanwhile, most broking houses and equity analysts have said that the TRAI proposal on 2G spectrum, if implemented, will impact operators negatively and result in a shakeout in the sector.
“If these recommendations are accepted, it may lead to a shakeout in the sector with few more operators exiting. We consider the proposals to be negative for incumbents/new entrants,” said a report from Goldman Sachs.
“The TRAI proposals imply that 2G spectrum is costlier than 3G spectrum, we see a very low possibility of operators like Idea, Uninor (whose licences were cancelled) to bid aggressively in the 2G auction. We now also do not expect Bharti/Vodafone to bid for 1800 MHz spectrum,” it said.
Another report from UBS Investment Research said that the TRAI recommendations are flawed and it will plunge the industry into litigation, if implemented.
Present spectrum value
Bank of America Merill Lynch said that the TRAI's proposals will undoubtedly raise the industry's entry barriers ($3.5billion outgo for pan-India entrant) but also lift the cost of staying in business for incumbents whose licence renewals become due from 2014 onwards. “Our prima facie calculations indicate that present value of spectrum renewals may amount to 17 per cent of market-cap for Bharti and 41 per cent of market-cap for Idea, assuming existing spectrum (900 & 1800) is renewed at new reserve prices,” Merill Lynch said in its industry report.
HSBC Global Research said it did not find much logic in the 2G spectrum being priced so high. “We don't expect broad-based participation in the upcoming auctions if this pricing happens to be the final price. We believe the Government will have to significantly revisit the pricing recommendations from TRAI. We believe these recommendations have the potential to delay spectrum auctions and likely to add to the uncertainty of impacted new entrants,” it said.
Meanwhile, Mr Rajiv Bawa, Chief Representative Officer, Telenor Group in India, said, “We do not believe that these are the auctions that the Supreme Court ordered. The Court did not order the TRAI to devise a method to evict new operators. It ordered an auction that may enable new operators to continue. We hope the Government will not allow these erroneous recommendations to cause a violation of that order or of its own policy of affordability, competition and FDI in telecom.”