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4 reasons why telecom regulator slashed spectrum base price so drastically

Corporate Sep 10, 2013

New telcos cry foul over Trai’s massive base price cut

By Sindhu Bhattacharya

New Delhi: Telecom regulator TRAI seems to have worked on the 'please all' theory with its recommendations on spectrum issues.

Yesterday it recommended a drastic cut in base price, sought guidelines on spectrum trading before auctions are held, lowered spectrum usage charge which will help most telcos and sought clarity from the Department of Telecom (DoT)on how much spectrum is actually available for auctions.

It has also further legitimised refarming of 900 mkhz spectrum band by saying no spectrum will be reserved for telcos who already hold spectrum in this band, creating a level playing field. What more could telcos ask for?

Well, for one, some telcos - specially those which had lost licenses earlier and had no option but to participate in November 2012 auctions to stay in business - are none too happy. They say instead of helping smaller or new telecom aspirants to find their feet in a fiercely competitive market, TRAI's drastic price reduction is working to their complete disadvantage.

AFP

Some mobile operators say that TRAI's drastic price reduction is working to their complete disadvantage. AFP

The Supreme Court cancelled 122 telecom licenses which former minister A Raja had allotted in 2008. This meant several telcos lost all of their licenses and had no option but to participate in the 2012 auctions to get back some spectrum. But prices in 2008 were much higher than the recommendations made by TRAI today for further auctions.

Arvind Bali, Director and CEO, Videocon Telecommunications told Firstpost, "There is every possibility that the successful bid price of the spectrum in the current auction may not even touch the reserve price of the November 2012 auction. In the event of that happening, those who bid in November, including Videocon Mobile Services, will continue to be at a disadvantage and there will never be a level playing field."

He said the regulatory body's decision did not have anything in it for players like Videocon. "Clearly, TRAI's recommendations are favorable towards existing players who acquired licenses prior to 2008 but penalise new players like us. We have already been penalised once, where despite coming out clean our 2G licenses in 21 service areas were quashed and we lost something like $2 billion," he said.

Others like Telenor may also face similar issues. It is possible that these telcos will seek a refund of the price differential, though any such payout by the Government is quite unlikely.

Bali said either the differential should be credited to Videocon in monetary terms or the government should allocate additional spectrum to the company.

A Telenor spokesperson declined to comment on the matter.

Another bone that telcos, specially incumbents with deep pockets, may have to pick with TRAI is the issue of reserving some 900 mhz or 1800 mhz spectrum for incumbents whose licenses are expiring shortly. The TRAI has recommended that no spectrum be reserved in either band. The big daddies of telecom like Bharti, Vodafone and Idea are sure to sulk over this and there is growing fear of the entire 900 mhz refarming ending up in courts.

The third issue, which is certain to aggrieve CDMA telcos is the recommendation that there need not be an auction of 800 mhz airwaves now.

AUSPI's Ashok Sud said this will limit CDMA players like Sistema Shyam Teleservices (SSTL) from bidding for more spectrum - taking its holding from 3.75 mhz to 5 mhz in some circles. This, he said, would hamper players' ability to offer quality services. Sud said that in the previous auctions, spectrum prices were prohibitive and therefore not many CDMA players came forward.

He also criticised the recommendation of TRAI to go ahead with creation of an EGSM band saying frequencies in this band are already being used by CDMA operators and it would be detrimental for CDMA players if EGSM band is created.

by Sindhu Bhattacharya

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