Vodafone India has offered a compromise formula to end the dispute with the Government over renewing its licences in the metros. The company has offered to pay Rs 4,000 crore to the Government to retain its mobile licences and spectrum in Delhi, Mumbai and Kolkata. The company’s licences in these lucrative markets will expire next year.

The Department of Telecom had earlier refused to give an automatic extension to the company on grounds that spectrum should be bought back by the operator in an auction.

Vodafone has written to DoT saying that the latter had incorrectly rejected its application for extension. “We are not seeking extension on the same terms (as when the licences were given in 1994), rather we have repeatedly requested DoT to initiate suitable steps for extension of our license based on mutual discussion,” the Vodafone letter said.

The company said it was ready to pay Rs 600 crore for retaining spectrum in Kolkata and Rs 1,700 crore each for Delhi and Mumbai.

Doubling reserve price

Vodafone has arrived at the amount by doubling the reserve price fixed for 3G spectrum in 2010 for retaining its allocation in the 1800 MHz spectrum band. For retaining spectrum in the more efficient 900 MHz band, the company has offered to pay 1.3 times more. In exchange Vodafone has sought a flat spectrum charge of 3 per cent compared to the existing slab system.

The amount offered is however much lower than the base price fixed by DoT earlier. The base price was fixed at Rs 485 crore per unit of spectrum in Delhi, which means that if Vodafone wanted to retain at least 10 Mhz of spectrum in the 1800 Mhz band it would have had to pay at least Rs 4,850 crore for Delhi alone.

But Vodafone is hoping that its offer could act as an indicator for the telecom regulator, which is now reviewing the base price for the next round of auctions.

“The test of whether the auction has delivered a fair market price would be that 100 per cent of the spectrum has been sold,” it said.

If accepted this would have a positive impact on all incumbent players because even players such as Airtel have to get their licences renewed in 2014.

thomas.thomas@thehindu.co.in

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