Delhi fixes high base price for 2G spectrum auction Potential

Mobile phone firms plan to drag the government to court over recent policy decisions Rs416b

Nau s h a d K . C h e r r ay i l

Mobile call rates in India are expected to increase between 30 and 80 paise per minute due to a disappointing decision by the Cabinet to fix a high base price for auction of scarce 2G spectrum at Rs140 billion (Dh9.28 billion).

The decision will prove to be “regressive” for the sector’s growth and that it would force operators to hike tariffs, said GSM operators body Cellular Operators Association of India (COAI).

The Cabinet took the decision to fix the reserve price at Rs140 billion for 5MHz of airwaves. The sector watchdog Telecom Regulatory Authority of India (TRAI) had recommended around Rs182 billion for the spectrum auction.

The telecom spectrum auction could fetch the government at least Rs416.50 billion.

Amount telecom spectrum auction could fetch.

The reserve price fixed would be a disappointment for the telecom industry, with more than 900 million mobile subscribers, which had been pitching for a 80 per cent cut in the reserve price suggested by TRAI.

The new prices approved by Cabinet are up to 23 per cent lower than reserve price for pan-India spectrum (in 1800 Mhz band) suggested by TRAI for the auction.

Likely hike

According to S.C. Khanna, secretary general of the Association of Unified Service Providers if India, tariffs are expected to go up between 30 and 80 paise per minute because of the high reserve price.

Following the 2G spectrum scam, the Supreme Court in February had cancelled 122 telecom licences awarded in 2008 to eight service providers including all permits of Uninor, Loop Telecom, Etisalat DB, Videocon, STel, 21 licences of Sistema Shyam, 9 of Idea Cellular and 3 licences of Tata Teleservices on grounds that these were arbitrarily granted and asked the government to conduct fresh auctions by August 31.

But this deadline may not be met and the government may approach the Supreme Court for extension of the timeline.

Mobile phone companies plan to drag the government to court over recent policy decisions related to the auctions, possibly delaying the sale process and adding to the uncertainty prevailing in this litigation-prone sector.

KPMG Executive Director Jaideep Ghosh said the pricing is on the higher side and that tariffs for consumers, which have gone up recently, would continue to rise.

The auction is crucial for companies such as Uninor and Sistema Shyam Teleservices, who have time till September 7 to offer their services and after which will be forced to close down their operations in case they fail to get a licence.