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Corporate Aug 3, 2012

Cabinet fixes Rs 14K cr for 5MHz, Rs 18K cr for CDMA

By Firstbiz Staff

New Delhi: The cabinet today fixed a minimum or base price of Rs 14,000 crore for the Supreme Court mandated auction of telecom spectrum.

The cabinet, headed by Prime Minister Manmohan Singh, decided to fix the reserve price at the lower end of the Rs 14,000 crore to Rs 15,000 crore band that was recommended by an Empowered Group of Minister (EGoM), official sources said.

Deciding the right price. Reuters

The EGoM had suggested a reserve price at Rs 14,000-15,000 crore for 5 Mhz of airwaves as against around Rs 18,000 crore recommended by sectoral regulator Trai for the auction of spectrum vacated from cancellation of 122 licences by Supreme Court.

The price is for airwaves in the 1800 MHz band, in which GSM-based mobile carriers operate.

For airwaves in the 800 MHz band, which is currently used by CDMA-technology based carriers such as the Indian unit of Russian conglomerate Sistema (SSAq.L), the cabinet set the starting price at 1.3 times the 1800 MHz band.

Sources said the Cabinet approved levy of annual spectrum usage charge of 3 to 8 per cent on different slabs of revenue as was recommended by the EGoM headed by P Chidambaram.

Chidambaram has been made the finance minister in a minor Cabinet reshuffle early this week.

The apex court had in February this year cancelled 122 licences issued by the then telecom minister A Raja in 2008 and asked the government to conduct fresh auctions by 31 August. But this deadline may not be met and the government may approach the apex court for extension of the timeline.

The reserve price fixed would be a disappointment for the telecom industry which had been pitching for a 80 percent cut in the reserve price suggested by TRAI which they felt would lead to up to 100 per cent hike in mobile telephone charges.

The auction is crucial for companies like Uninor and Sistema Shyam Teleservices, who have time till 7 September to offer their services after which they will be forced to close down their operations in case they fail to get a licence.

The cabinet also approved base price at Rs 18,000 crore for CDMA. Reacting to the Cabinet decision, the auditing agency PWC said that the telecom firms may have to take additional debt of Rs 3.2 lakh crore due to sky high price.

The government will continue with 2-8% Spectrum Usage Charge, Union Information and Broadcasting Minister Ambika Soni said after the cabinet meeting.

Bankers told business news channel ET Now that they may find it difficult to fund spectrum charges.

"Litigation is bound to follow," Supreme Court lawyer Harish Salve told ET Now.

With input from Agencies

by Firstbiz Staff

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