We stand by our pricing math: Trai chairman

The chairman of the Telecom Regulatory Authority of India (Trai), JS Sarma, has set the cat among the pigeons by setting a very high base price for spectrum auctions. But a day after his recommendations elicited a flurry of adverse reactions from telecom operators, Sarma told Firstpost he stands by his pricing math.

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The regulator has proposed a pan-India spectrum renewal fee of about Rs 3,600 crore for a 5 megahertz (Mhz) block, which is about 8 percent higher than even the pan-India 3G spectrum block.

“As I have said repeatedly, spectrum pricing is a very small percentage of call tariffs. Also, we have liberalised spectrum and this comes at a cost. The spectrum we are offering now is technology agnostic and service agnostic. Operators can offer voice, data at speeds of 150 mega bits per second, and even LTE (4G) is possible. The reference point for pricing has been kept at ,2100 Mhz, for which auctions happened two years back. We stand by what we have done,” Sarma said.

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On the criticism that the new auction mechanics would virtually put some new telcos - who lost licenses after the Supreme Court judgement in February - out of business for more than one year, Sarma said it is not necessary that the second round of spectrum auctions will happen in late 2013-14.

As per Trai recommendations, only 5 mhz of spectrum will be auctioned in 2012-13. This could, in effect, mean that established telcos with money bags could well outbid new telcos in fresh auctions, and since there is space for only one player, new telcos may be unable to bag any license at all this year.

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Sarma explained that the Government itself has set a 400-day deadline for auctions this year. “So, anyway we can only do one round of auctions this fiscal. But nothing stops us from conducting the second round early in 2013-14,” he said, giving hope to players like Telenor, Sistema and Etisalat, which are interested in bagging spectrum again. These companies could get lucky early next fiscal if not in 2012-13.

He also said the recommendations make it clear that if any of the new telcos is the second-highest bidder, it can also be allotted spectrum this year itself. But in any case, only one new telco may get to restart business in 2012-13 out of the nine companies that lost their licenses.

“We have said that if an incumbent and a new telco are the first and second highest bidders, the incumbent could be given 2.5 mhz and another 5 mhz could be given to the new telco,” he said.

Sarma said that only 5mhz of spectrum will be auctioned this fiscal since Trai wants to find out the actual price of spectrum. What Trai has recommended is the base price for spectrum and bids can go much higher than this price. What Sarma means is that by auctioning the smallest block of spectrum first, Trai is trying to find out the value of spectrum for future auctions.

On widespread objections to reframing of the 900 mhz band - taking it away from incumbents and then redistributing it - Sarma said this issue has been discussed in detail by the telcos, the Department of Telecom and the Telecom Commission before Trai gave its final recommendations.

So, from the looks of it, Sarma is unlikely to revise any of his suggestions as of now.