Tel­cos May Not Get Easy Terms for Spec­trum Auc­tion Pay­ment

DoT op­poses Trai’s pro­posal to al­low tele­com firms to pay 10% of win­ning bid ini­tially, as it fears such a move could hit govt rev­enue col­lec­tions

The Economic Times - - Companies: Pursuit Of Profit - Anan­dita.Manko­tia@ times­

New Delhi: The De­part­ment of Telecom­mu­ni­ca­tions may not al­low tele­com com­pa­nies lib­eral pay­ment terms for spec­trum auc­tions, as pro­posed by the reg­u­la­tor, be­cause it could hit the govern­ment’s rev­enue col­lec­tions.

To ease the bur­den for car­ri­ers, the Tele­com Reg­u­la­tory Au­thor­ity of In­dia had rec­om­mended that tel­cos be al­lowed to pay 10% of the win­ning bid ini­tially for any spec­trum in an auc­tion. The bal­ance, in­clud­ing in­ter­est, could be paid in equal in­stal­ments over the next 18 years.

At present, an auc­tion win­ner can pay the en­tire money up­front or 25% or 33% of the to­tal amount ini­tially, de­pend­ing on the band, and the re­main­der in 10 equal in­stal- ments af­ter a two-year mora­to­rium. The DoT, how­ever, op­posed the pro­posal. “The pay­ment terms have al­ready been eased. In the 2010 auc­tions, the govern­ment had re­ceived an up­front pay­ment and later to sup­port the in­dus­try, we changed it to stag­gered pay­ment,” said an of­fi­cial. The Tele­com Com­mis­sion, an in­ter­min­is­te­rial panel, is sched­uled to take a de­ci­sion on the mat­ter on March 30. The panel will also de­cide on the pric­ing and quan­tum of 700 MHz spec­trum — con­sid­ered the most ef­fi­cient for 4G ser­vices — to be auc­tioned.

Trai sug­gested a re­serve price of .₹ 11,485 crore a unit for the 700 MHz band — the most ex­pen­sive — and a block size of 5 MHz for the up­com­ing auc­tion. At this base price, each block would fetch the govern­ment over .₹ 57,000 crore, which is more than half the en­tire pro­ceeds of the 2015 sale of spec­trum.

Trai’s rec­om­men­da­tion on easy pay­ments was made in its re­sponse to the Tele­com Com­mis­sion’s queries on the re­serve price and quan­tum of air­waves to be of­fered in the auc­tion sched­uled for July. The reg­u­la­tor also main­tained its stand on pric­ing the 700 MHz band­width at .₹ 11,485 crore per MHz and the method­ol­ogy for ar­riv­ing at the price.

“Re­duced up­front pay­ment and longer pay­ment sched­ule will re­sult in a sit­u­a­tion where bid­ders would find them­selves in ‘pay as you earn’ sit­u­a­tion and will not be bur­dened by pay­ments in the ini­tial years,” Trai said in its rec­om­men­da­tions. The pay­ment plan pro­posed by the reg­u­la­tor would have ben­e­fit­ted tel­cos if the re­serve price for 700 MHz had been re­duced or if the govern­ment low­ered the in­ter­est to be paid, said Prashant Sing­hal, global leader tele­com with EY.

Ra­jan Mathews, di­rec­tor gen­eral of the Cel­lu­lar Op­er­a­tors As­so­ci­a­tion of In­dia, agreed. “This method­ol­ogy as pro­posed by the reg­u­la­tor would have cer­tainly helped tele­com op­er­a­tors as far as all other bands of air­waves are con­cerned. How­ever, what would have re­ally helped gen­er­ate de­mand for 700 MHz band was a lower re­serve price,” said Mathews.

Tele­com op­er­a­tors in­clud­ing No.1Bharti Air­tel and Re­liance Jio In­fo­comm had writ­ten to the reg­u­la­tor sug­gest­ing that the sale of air­waves in the 700 MHz band be de­ferred be­cause com­pat­i­ble hand­sets are still be­ing de­vel­oped glob­ally.

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