While the government can rejoice on the Telecom Regulatory Authority of India (TRAI) recommendations on pricing of the 2G spectrum, mobile operators, particularly old ones, have all the reason to worry as they will have to pay hefty amounts for spectrum they are holding or have asked for. This would not only hit the earnings of telecom companies, but may also force them to hike tariffs to cover up for the outgo.
Reacting to the proposed six-fold hike for pan-India 2G spectrum, from Rs.1,658 crore (2001 prices) to Rs.10,972 crore (2010 prices) and Rs.4,571 crore for one 1 MHz of pan-India spectrum, the Cellular Operators' Association of India (COAI), which represents GSM operators, termed the recommendations “disastrous.”
“The TRAI's recommendations are like changing the goal posts in the middle of the game. We cannot go among subscribers and recover it. The assumptions used by TRAI are open to question… it has used very sophisticated mathematical modelling. It may take a couple of weeks for us to understand, but on the face of it, these look very disastrous for the industry,” COAI Director-General Rajan Mathews said.
Bharti Airtel said the TRAI recommendations went against the stated principle of the government to offer affordability, fairness and level-playing field. There seems to be huge inconsistency in terms of the differences of prices in various circles, it said.
“The proposed pricing of spectrum renewal fails to provide a level-playing ground between the older operators and those who have got licences in 2008. Thus, while 2008 licensees walk away with spectrum for 20 years at 2001 pricing, the older operators whose licences come up for renewal in few years will have to pay exorbitant one-time charges. Level-playing field demands that the price for spectrum allocated in 2008 to the new operators and cross over technology operators, should be the same, whatever is implemented for the renewal of licences,” it said.
All spectrum given under 2G bands — GSM as well as CDMA — must be clubbed and considered as ‘total allocated spectrum' for purpose of pricing and eligibility, it added.
However, new operators who are still to roll out their services due to scarcity of spectrum believe that this would force old players to vacate spectrum which they have been hoarding and help them to start their services. “This would legalise the additional spectrum hoarded by GSM players at a fraction of the cost. The contracted limit of spectrum is 6.2 MHz and the government must seek return of additional spectrum without any delay. Moreover, the price of additional spectrum is just one-time entry fee, whereas it should be recurring on an annual basis,” a senior executive of a new operator said.source