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
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.