Broad spectrum trouble PDF Print E-mail
Thursday, 10 February 2011 00:00
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Telecom minister Kapil Sibal may have accepted the Justice Shivraj Patil report that said all 157 licences issued by A Raja were illegal, but this hasn’t stopped Trai from making a recommendation that confers a huge benefit on these very firms that have already got 4.4 MHz of spectrum at dirt-cheap rates. Indeed, if the Trai recommendations are accepted, these 157 firms (it could be less if 69 of these are cancelled, as Trai has recommended) will eventually get their 6.2 MHz of spectrum at Rs 4,844 crore (including the Rs 1,658 crore paid for 4.4 MHz of spectrum) while Trai has itself valued this 6.2 MHz at Rs 10,972 crore! It gets even more curious. Trai has said that while companies should pay Rs 1,769.8 crore per MHz for an additional 1.8 MHz of spectrum, the going rate will be two-and-a-half times higher for those telcos who have more than 6.2 MHz. These firms, which include BSNL, Bharti Airtel and Vodafone, will pay Rs 4,571.9 crore per MHz for the extra spectrum they have.

Trai’s recommendation is all the more interesting since, while demolishing CAG’s estimates of losses last month, Sibal had said 2G spectrum handed out by Raja was just a third as efficient as 3G spectrum, so the CAG was wrong in calculating the losses based on the bids received in the 3G auctions. Sibal then reduced the CAG’s loss estimate to a third on just this ground. Trai’s recommendations do not say 2G spectrum should be priced at a third of 3G, but they’re pretty close—for spectrum of less than 6.2 MHz, Trai has said a price of 53% of the 3G value should be taken.

Some of the older players like Vodafone, Idea and Aircel will benefit from the lower valuations put on 2G spectrum till a level of 6.2 MHz, as they have only 4.4 MHz in several circles (the biggest beneficiaries, of course, will be the 157 licences Raja issued). But most of them will also be badly hit. The initial lot of mobile licences for metros, for instance, will come up for renewal in 2014, the others will come up after that. So, the older telcos will have to renew licences at 1.4 times the 3G rates while the newer telcos will have licences at a fraction of these. Fortunes in the telecom space are all set to get reversed thanks to the Trai recommendations. Talk of policy-induced distortions.


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