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A better ring to it PDF Print E-mail
Saturday, 09 November 2013 00:00
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Indian Express edit

 

Telecom Commission does well to accept Trai's view, but a swap with defence is needed.

Given the opposition mounted by the bureaucrats in the telecom ministry to the regulator's recommendations on lowering the reserve price of auctions, the Telecom Commission has done well to largely accept what the regulator was in favour of. Over the past year, auctions have repeatedly failed because the base price was too high and therefore out of step with the changed economic realities. Along with more liberal merger and acquisition norms, the government can now look forward to reasonably successful auctions in January. What has to be kept in mind is that while there is a tapering in the growth of new subscribers for plain-vanilla voice calls, natural as any market matures, the market for data — people using their smart phones/dongles to surf the internet — has taken off dramatically. Naturally then, firms will pay the highest amounts in the auction for the spectrum that helps them serve this fast-growing market, and not as much for the spectrum used to service just the "voice" customers — that means they will pay more for 900MHz and 2100MHz spectrum, and less for the 1800MHz spectrum.

The problem here is that there are limited amounts of 900MHz and 2100MHz spectrum and given the financial shape the companies are in, they are unlikely to overbid as madly as they did in 2010 for the 2100MHz spectrum. In which case, the government's best bet will be to somehow get more spectrum in these frequency bands. That's not as difficult as it sounds. While the telecom and defence ministries have a pact on sharing spectrum, the telecom ministry has unused spectrum in the 1900MHz frequency which it can trade with the defence ministry to free up spectrum in the 2100MHz frequency. This will enable the government to auction three extra slots in the 2100MHz frequency, which is loosely referred to as the 3G band.

If it is assumed that the changed economic conditions since 2010 means the government will not get more than half of what it did for the 3G auctions at that time, this means the three extra 3G slots and the one that the government already has can fetch $5- 6 billion. If the government acts sensibly, since neither MTNL nor BSNL have done much with their 3G spectrum, this too should be taken back and auctioned off — but since flooding the market with 3G spectrum will lower prices, perhaps that is something which can be attempted a few years down the line. In other words, the auctions can get the government a lot more money if it chooses to be a little more proactive.

 
 

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