TRAI swears by lower floor price for spectrum auctions

Telecom Regulatory Authority of India (Trai) on Wednesday stuck to its earlier recommendation that the government should cut the reserve price sharply for the upcoming 900 MHz and 1800 MHz spectrum auctions.

It rejected the government request to reconsider its recommendations that the reserve price for spectrum in the 900 MHz band in some key areas be reduced by 60%. Further, Trai had suggested a 37% cut in the reserve price for spectrum in the 1800 MHz band.

In doing so, Trai may well have paved the way for revival of investment and growth in the telecom sector, analysts said. For, telecom operators for long have resented what they thought was an unreasonably high level of base price for the spectrum auctions.

The last two auctions conducted in November last year and early this year had failed miserably on account of high reserve price. According to industry experts, the then reserve price of Rs 3,622 crore per megahertz (MHz) for 1800 MHz band spectrum recommended by the selfsame Trai made it unaffordable for telcos looking to participate in the bidding.

Trai, however, argued that its latest recommendations (on reserve prices for different local service areas or LSAs) follow a logical sequence, given the valuations obtained through adoption of different methodologies. There is no scope at all for it to “reconsider” the reserve price, Trai told M F Farooqui, secretary of the Department of Telecommunications.

In response, the Cellular Operators Associations of India (COAI) welcomed the move. COAI’s director-general, Rajan Mathews, said, “It’s a much-needed recommendation which, if accepted, would help improve the health of the industry.”

He, however, said lower floor prices would not necessarily lead to another round of reduction in telecom tariffs. For, over the last 10-15 years, the prices have come down dramatically. Lower floor prices would make available more resources to telecom operators which they would invest in 3G and 4G,” he said. “Trai’s objective was to bring the industry back to its feet. We’re the second largest country by subscribers, but we bring only 3% total revenue globally.”

Trai took the opportunity to criticise policies that kept the country behind the rest of the world “just when we began to catch up. There is a telecom revolution under way in many parts of the world.

By conservative estimates, we are 5-10 years behind”.

“The mobile telecom sector has seen both boom and bust in its short two-decade history. Till some years ago, it was the toast of industry and the country.

But, in a short span of five years, a series of man-made mistakes has brought the sector to its knees,” Trai said.

It appears Trai was so incensed that it thought it fit to invoke William Shakespeare in its letter to the DoT: “There is a tide in the affairs of men, which taken at the flood, leads on to fortune.

Omitted, all the voyage of their life is bound in shallows and in miseries. On such a full sea are we now afloat. And we must take the current when it serves, or lose our ventures.”

Yet, all that poetic fury may or not impress the Union Cabinet which will take a final call on the issue once the DoT forwards Trai’s recommendations to it.