DoT to press for 17% increase in 2G base price above Trai's proposed rate

NEW DELHI: The telecom department (DoT) will press for a 17% increase in the base price for 2G spectrum bids over the rate proposed by Trai, further adding to the woes of mobile phone companies that were hoping the government would dilute the recommendations of the regulator.

A DoT panel studying Trai's proposals on spectrum auctions has concluded that reserve price for second-generation airwaves in the 1800 MHz band should be revised to Rs 4,245 crore per unit (on a pan-India basis), said a senior official. Trai has proposed a base rate of Rs 3,622 crore per unit.

In another step that will upset the industry, the DoT panel has also rejected the regulator's proposal to allow mobile phone companies to stagger their payments for spectrum bagged through the bidding process. It is also of the opinion that mobile phone companies must not be allowed to mortgage spectrum to raise funds from financial institutions.

A final decision on DoT's position will be taken at a meeting of the Telecom Commission on Thursday. This will be communicated to the Empowered Group of Ministers on spectrum, headed by Finance Minister Pranab Mukherjee, which has been tasked with the responsibility of finalising the guidelines for the auctions.

The amendments suggested by the high-powered DoT panel will come as a big blow to the telecom industry, which has lobbied hard with the government for rejecting the regulator's recommendations.

NOT FOR HIKING BASE PRICE, SAYS DOT

Telcos have warned that if these proposals are accepted, call tariffs would go up between 30% and 100%, and the viability of the industry would be badly hit. Foreign players such as Norway's Telenor and Russia's Sistema have said they will not participate in the upcoming auctions if Trai's proposal to auction airwaves at 13 times the price at which airwaves were awarded in 2008 is accepted.

A senior DoT official clarified that the department was not recommending a hike in the minimum price for the upcoming 2G auctions, but was only seeking to apply Trai's formula in the right fashion.

"Trai had determined the reserve price in the 1800 MHz band based on the 3G auction price of 2010. We feel that 3G auction price must be indexed for a period of two years to determine the present value of spectrum. During this period, State Bank of India's PLR rates have been between 11.75-14.75% and therefore the revised figure works out to Rs 4,245 crore for every unit of 2G spectrum in the 1800 MHz band," this official explained.

This official also added that the panel was against allowing telcos to pay for airwaves over a 12-year period since 'it did not want a repeat of the 1999 experience, when telcos had bid exorbitant amounts for permits, and subsequently failed to pay up'.