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Corporate Jun 26, 2012

Pranab's exit may put spectrum price, EGoM in cold storage

By Sindhu Bhattacharya

The fate of spectrum policy and reserve price of the 2G spectrum auctions hangs in balance as political uncertainty and corporate rivalries delay crucial decisions. After Pranab's possible elevation to the President's office, any political solution to the tangled issue of reserve price for upcoming 2G auctions is anyway delayed.

Now, unless a new head is appointed for the Empowered Group of Ministers (EGoM), which is looking into this issue, nothing will move. Also, who ever heads the EGoM now needs to be persuasive enough and have enough political clout to convince the powerful telecom lobbies which have succeeded in delaying a decision this far.

No spectrum worries. PTI

A person familiar with developments at dual technology operators-Tata Tele and Reliance Communications-pointed out that Pranab had patiently heard their pleas some time back over lowering the reserve price. The EGoM has to decide on whether to keep the Trai suggested price of Rs 3,622 crore per mhz of 2G spectrum or not. This person said, "We had proposed in our meeting with Pranab Mukherjee that if the government were to do away with staggered payment option, it should bring down the price for 5mhz of spectrum to about Rs 12,000 crore (from Rs 18,000 crore now). Even this is not acceptable but at least it is lower than the present price."

He also said that the dual technology operators wanted license period to remain 20 years against a suggestion that reserve price would be halved and licenses awarded for 10 years, renewable after that. Mukherjee, this person said, had heard their arguments and assured that everything would be looked into. "We don't know how the new EGoM head will operate".

Besides political uncertainty, intense corporate rivalry is also spoiling any chances of a compromise formula being worked out. So much so that Telecom Minister Kapil Sibal's plan of taking the issue of charging for spectrum-and there are four options here-to the Union cabinet for approval is now awaiting some clarity from telcos. An official of the Department of Telecom (DoT) said, "What happens if we get this proposal cleared but no operator agrees with its provisions? We want a consensus, which is not happening. Unless that happens, what point is there in taking these issues to the Cabinet?"

A story in the Mint newspaper said DoT has offered four spectrum pricing options to telcos once the market value of spectrum is discovered at the auction. These include the charging of all spectrum prospectively (for the remaining validity period of the licences), for spectrum above the contracted 6.2Mhz, for spectrum above the start-up 4.4Mhz and not charging for the spectrum at all.

If spectrum is charged prospectively, the burden on the newer operators (RComm and Tata Tele) is likely to be far heavier than on the older ones since they have many more years of license left.

The Mint story also points towards other issues where operators differ -- reduction of spectrum usage charges in return for a higher spectrum charge, spectrum sharing, liberalisation of spectrum as well as issues related to inter and intra circle roaming. Then, refarming of 900 mhz spectrum-where incumbent GSM telcos are being asked to return the more efficient 900 Mhz and bid at new, higher prices for the less efficient 1800 Mhz-is also proving to be contentious.

Mint says here too the DoT has offered four options.

It says if entire 900 Mhz spectrum is taken away from incumbents, "there are no guarantees that the operator will get all the spectrum back", the DoT official said. Other options include the operator paying the new market price discovered, via auction, for a renewed period; refarming of all spectrum above 5Mhz or refarming all spectrum above 2.5 Mhz.

As Firstpost report earlier, Telecom Minister Kapil Sibal has been exploring consensus by offering options in each area to telcos so that they drop all court cases related to the various decisions that have been taken and also agree to not start any fresh litigation against DoT on these issues.

Given intense corporate rivalries at work, will Sibal succeed?

by Sindhu Bhattacharya

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