EGoM recommends lower price for spectrum auction

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The Empowered Group of Ministers headed by Home Minister P. Chidambaram on Friday decided to recommend to the Cabinet a lower than sector regulator TRAI- proposed reserve price for auction of spectrum.

The reconstituted EGoM, which met for the second time this week, firmed up its views on key issues like reserve price, spectrum usage charge and terms of payment.

The same are being sent to the Union Cabinet headed by Prime Minister Manmohan Singh for a decision, Telecom Minister Kapil Sibal said after a two-and-half-hour long meeting.

The Telecom Regulatory Authority of India (TRAI) had recommended a base price of Rs 3,622 crore per unit of spectrum, called MegaHertz, for the auction of spectrum vacated from Supreme Court cancelling 122 licences issued by the then Telecom Minister A. Raja in 2008.

This base price translated to over Rs 18,000 crore for a pan-India spectrum for new companies. "The EGoM discussed three specific issues. The Empowered Group of Ministers are going to make a specific recommendation on each of these issues to Cabinet so that Cabinet decides on it finally," Sibal told reporters.

While Sibal refused to give details, sources privy to the deliberations said the EGoM has decided to lower the TRAI suggested base price.

Telecom companies bidding in the auction will pay to the government an annual fee for using airwaves, called spectrum usage charge, besides the price at which they buy the spectrum.

The industry had been pitching for a 80 per cent cut in the reserve price as they felt TRAI recommended rates would lead to upto 100 per cent hike in mobile telephone charges. Sources said EGoM may not have gone for a drastic cut in reserve price.

At the last meeting, the EGoM had asked the Department of Telecom to prepare a matrix of reserve price in the range of Rs 12,000 crore to Rs 18,000 crore and do an impact analysis on government revenue at different rates as well as on mobile tariff.

This impact analysis was to be done on the basis of spectrum usage charge in the range of 3 to 8 per cent of revenue earned from telecom services.

Sources said EGoM may recommend to the Cabinet giving auction winners option to make deferred payment of charges as had been suggested by TRAI.

In that case, telecom companies would have to pay a certain amount of money upfront for the spectrum and the rest over a certain period of time along with interest.

However, no decision was taken on the one-time fee that DoT had proposed to levy on existing telecom operators by making changes in their licence conditions.

DoT wants incumbents to pay auction-discovered price for the spectrum they hold, a move bitterly opposed by CDMA operators.

Sources said the EGoM has recommended a 3-6 per cent spectrum usage charge.

The Union Cabinet will take a final decision on the prices of telecom spectrum and one-time fees payable by incumbent telecom operators.

The TRAI suggested auction starting price is nearly 10 times higher than what companies had paid in the 2008 sale.

The Supreme Court has set August 31 as deadline for the auction process to be completed. But an inter-ministerial committee has indicated the deadline is likely to be missed, given the present pace of decision-making.