Liberal terms for 2G re-auction
Now that the Union Cabinet has fixed the reserve price for the auction of 5 MHz spectrum in the 1,800 MHz band at `14,000 crore, the government can go ahead with the re-auction of the spectrum gained when the Supreme Court cancelled the 122 licences of the telecom operators. The re-auction can meet the deadline of August 31 set by the apex court. The Cabinet had accepted the lower price (between `14,000 crore and `15,000 crore) for spectrum suggested by the empowered group of ministers headed by Mr P. Chidambaram in deference to the industry’s protest that the price of `18,000 crore fixed by the Telecom Regulatory Authority of India was too high. The terms are also fairly liberal with the telecom operators having to pay just one-third of the bid, or around `4,500 crore, up front with a moratorium of two years, and the rest of the payment staggered over 10 years. It has permitted the telecom companies to deploy any technology on these airwaves and also mortgage spectrum to banks in order to raise funds for the auction.
It is hoped, as communications minister Kapil Sibal said, that the auction of spectrum will proceed without further delay. It’s a win-win situation for both the government and the telecom companies. The government had hoped to collect `40,000 crore earlier and will now collect a minimum of `38,000 crore. However, it will get only 33 per cent of this, close to `13,000 crore which will be paid up front in the first year. Still, it will help ease the government’s fiscal deficit a bit.
The industry still feels that the reserve price is too high and unreasonable and will impact the viability of the business. They said that raising tariffs would be inevitable. Trai’s calculations show that the impact of the auction price would be just five paise per minute. If this is correct, then the government will have to protect the consumer by fixing the price cap at the present tariff plus five paise so that the consumer is not exploited.
There is little excuse for the telecom companies to raise tariffs as they had already raised tariffs by 30 per cent this year because, with 122 licences being cancelled, there wasn’t much competition. 2G requires fewer towers and this reduces costs. Besides, they paid much more for 3G at `16,500 crore. The operators should now move on and make the best of the liberalised 2G spectrum auction.