Telecom Operators Await Telecom Commission’s Final Say

Department of Telecom has accepted recommendations for pricing 2G spectrum by the Telecom Regulatory Authority of India. The internal committee has rejected other proposals and the telecom commission will announce its final decision on November 28th. GSM mobile operators have their fingers crossed till the final decision.

The proposals rejected by the committee include those related to changing the roll out obligation norms, reducing license fee to 6 percent and relaxing mergers and acquisition norms.

The TRAI proposed that 2G spectrum price beyond 6.2 MHz should be Rs 4,571 crore per MHz. The DoT committee has accepted this proposal and the price will be calculated from May 27, 2008 for the remaining period of the license. The panel’s decision will affect incumbent players such as Bharti Airtel and Vodafone, which have up to 10 MHz spectrum in some circle. The panel has also accepted TRAI’s proposal to price spectrum in the 900 MHz band 1.5 times higher.

TRAI proposed that all operators should pay uniform revenue share of 6% as license fee. However, the DoT panel has denied it and has proposed a uniform fee of 8 percent. Currently, operators pay license fee between 6 percent and 10 percent of their annual revenues. Infrastructure providers such as tower companies and Internet service providers do not pay any revenue share to the Government. A uniform rate of 8% will increase the burden on all telecom companies.

Another proposal by TRAI suggests that operators with spectrum in 800/900 MHz band should be kept out of auction for 700 MHz band. Though DoT has accepted the proposal in principle, it will give its final decision after TRAI gives recommendations on spectrum re-farming.

If DoT finally accepts the above mentioned proposal, incumbent operators like Airtel, Vodafone and Reliance Communications will not be able to bid for the 700 MHz band, which is globally used for 4G spectrum. Reliance Infotel, a subsidiary of Reliance Industries Limited and a few new GSM players will be among the bidders for the 700 MHz band.

TRAI suggested that a fund should be set up for spectrum re-farming. However, DoT panel has rejected the proposal by providing argument that re-farming costs can be met from the consolidated fund of India.

Roll out obligation should be based on habitation and not geography, proposed TRAI. DoT panel said that it is not possible to change the norms now because most of the operators have already completed roll-out obligation. Also, there are limitations in measuring habitation due to undefined boundaries in villages.

The final decision by the telecom commission is eagerly awaited by telecom operators. The proposed tightened norms will certainly affect the incumbent players in the telecom industry.


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