Spectrum pricing blues continue

The confusion continues!

The Empowered Group of Ministers (eGoM) met again today to decide on the base price for auctioning 2G spectrum. While the meeting is over there is yet no clarity on what has been decided. While communications & IT minister Kapil Sibal refused to give details, sources privy to the deliberations said the eGoM has decided to lower the TRAI suggested base price. The eGoM has also agreed to allow operators to stagger the payment.

Though the numbers are still not available, the base price for the auction of 5MHz of spectrum could range between Rs 14,000 crore to Rs 16,000 crore in the 1800MHz band. In that case the spectrum usage charge (SUC) would range between 3-6%. At Rs 16,000 crore the SUC would be 3% and would rise by one percentage point as the base price increases by Rs 1,000 crore.

However, no decision was taken on the one-time fee that DoT had proposed to levy on existing telecom operators by making changes in their licence conditions.DoT wants incumbents to pay auction-discovered price for the spectrum they hold, a move bitterly opposed by CDMA operators.The Union Cabinet will take a final decision on the prices of telecom spectrum and one-time fees payable by incumbent telecom operators.

It is unlikely that the Cabinet will take a decision on the pricing of spectrum till such time as the eGoM comes up with a formula for prospective licensing. Essentially, the spectrum drama continues.

Waiting for EGoM

After many twists and turns, the Empowered Group of Ministers (EGoM) has to take a call on the base price for auction of 2G spectrum. But, ministers are wary of getting into the widening swamp of 2G. Pranab Mukherjee decided to go ahead and file a Presidential Nomination rather than come up with a number. Agriculture minister Sharad Pawar who was appointed to head the EGoM pulled out before the first meeting.

So what happens now?

First, the EGoM has to decide on the issue of providing a level playing field to new operators. In a Cabinet Note, the Department of Telecommunications (DoT) has sought imposing a one-time charge on incumbent operators. It argues that new operators have to pay the discovered price. Since incumbents have paid only Rs 1658 crore, they need to match the discovered price for the number of years their licence is valid.That puts a huge burden on later entrants like Tata Teleservices and Reliance Communications. However, that would allow the incumbents to offer all services--2G, 3G or 4G.

DoT has come with various options based on from when the operator is to be charged and how to base it on the amount of spectrum held. 
 

The retrospective charge would kick in from the time the licence was issued. However, that is part of the Presidential reference. The other is a prospective charge from when the EGoM recommends it. If operators decide not to pay, they would be able to offer only 2G services. That would be a clear negative in the longer term.

The second is on the spectrum held by operators. The first option is to charge operators for all spectrum they hold, the second for spectrum over 4.4MHz and the third for spectrum over 6.2MHz in a circle. It is only the incumbents that have spectrum exceeding 6.2MHz and state-owned operators BSNL and MTNL that have spectrum exceeding 6.2MHz.  

 For now, the telecom industry is waiting for the government to get out and clear the mess.