Value of 'extra' spectrum makes telcos join hands
When, after meeting top government officials, including the Prime Minister, as a delegation, Sunil Mittal tells journalists “you have to ask Anil (Ambani), he is the master of ceremonies”, you have to wonder as to what’s going on. What’s brought the warring lot—COAI, of which Sunil Mittal is a leading light, has filed a case in Court against Anil Ambani’s RCom getting ‘dual technology’ licenses—together is the fact that the government is in the midst of deciding what to charge these firms for the ‘extra’ spectrum they had got over what was contracted in their original licenses. While the CAG had put the loss on account of this ‘extra’ spectrum at R37,000 crore, the telecom regulator Trai had put it at a lower R17,000 crore or so—while CAG looked at the ‘loss’ from the time the telcos got the spectrum, Trai said it had to be charged only for the residual period of the license since all firms had got the spectrum based
on valid government notifications. But while doing so, Trai has put forward a differential valuation method—for spectrum between 4.4 and 6.2 MHz, Trai says a value of 53% of the 3G bid should be taken, and a value of 136% of the 3G bid be taken for spectrum beyond 6.2 MHz. Trai’s argument is that firms gain economies of scale beyond 6.2 MHz and so should pay more.
Apart from the fact that this method hits the larger telcos more, the telcos have a more fundamental objection. The 3G auctions, they rightly point out, were held in a supply constrained situation, so firms bid wildly for this. Which is why they have proposed the government hold a fresh 2G auction—if the courts declare the Raja licensees illegal, a lot of 2G spectrum will be freed up—and this be used as the basis for charging for the ‘extra’ spectrum. Since all firms have just got 3G spectrum and their pace of expansion has slowed, there is no excess demand today—so the auction should give a fair price. What if the new-found bonhomie results in collusive bidding? It looks difficult, given the large number of players, but one way out is to put a base price for the auction; another is to do intelligent auctioning as happened in 3G. Pity the Telecom Commission has postponed a decision on this twice already.