Trai's spectrum pricing will push up all telecom rates

New Delhi: If the Telecom Regulatory Authority of India (Trai) does indeed set the reserve price for 2G auctions at about Rs 3,780 crore (1.08 times the 3G reserve price for the 1,800 Mhz band, which was Rs 3,500 crore), mobile telephony may well become much more expensive for you and me.

According to CNBC TV18, the telecom regulator has recommended a high reserve price for 2G auctions but has made all 2G spectrum available to all players. It has also mooted a deferred payment schedule.

A leading 2G operator said that if the reserve price for fresh 2G auctions is indeed set this high, telcos will be left with no option but to hike charges to subscribers. “Take the case of players like Telenor or Sistema, who bagged 2G licences by paying only Rs 1,650 crore licence. If they were to bid again for spectrum which costs over twice the price they paid earlier, they may have to hike charges to stay viable. For existing telcos, too, this could spell trouble since this will become the benchmark price for licence renewal going forward. Price hikes could become the order of the day”.

[caption id=“attachment_285445” align=“alignleft” width=“380” caption=“Since the number of operators in the 2G space has reduced after 122 licenses were cancelled by the Supreme Court in February, competition has also effectively reduced.Reuters”] [/caption]

This operator said that high 2G reserve prices will also deter new players - such as AT&T and BT - from coming into the Indian market.

Also, since the number of operators in the 2G space has reduced after 122 licenses were cancelled by the Supreme Court in February, competition has also effectively reduced.

“If the reserve price is set high, it will deter new players and those who lost licences from bidding again. This would mean the end-consumer will suffer from higher charges,” said an industry veteran. He pointed out that when new operators entered the fray, cheaper call rates - through per second billing - were introduced, adding that increased competition was good for pricing.

Muhammad Chawdhary of PwC told CNBC TV 18 that “incumbent 2G operators would be much more prudent now than they were when bidding for the 3G auctions. They have already suffered for the last two to three years because of the very high 3G licence fee and further investments needed to satisfy roll out obligations. Besides, revenue growth for telcos last year was just 5 percent when subscriber growth was 30 percent.”

He said incumbents need to secure the right amount of 2G spectrum and will have to figure out their need circle by circle. “The valuation exercise will start now”.

According to CNBC TV 18, the reserve price for 2G auctions will be twice the price for 3G auctions of 900 Mhz band and four times the price for 3G auctions in the 700 Mhz band.