The Union Cabinet has approved the reserve price for auction of second generation radio waves as well as spectrum usage charges (SUC) and an auctioneer will be soon appointed to carry forward the process.
The Cabinet set the reserve price of Rs 14,000 crore for the 5 megahertz pan-India spectrum in the 1800 megahertz band, communications and IT minister Kapil Sibal told a news conference. The price is 22% lower than the telecom regulator’s suggestion.
At the Cabinet meeting, I&B minister Ambika Soni and defence minister A K Antony suggested that the spectrum price be fixed at Rs 15,000 crore, the second option provided by the empowered group of ministers (EGoM), sources said. They said the two ministers are learnt to have cited the perception about corruption to argue for the need to peg the reserve price closer to the Rs 18,000 crore recommended by the telecom regulator.
The Cabinet also endorsed the EGoM’s suggestion that the reserve price for the 800 megahertz band, which is used by CDMA operators, be fixed at 1.3 times the price for 1800 megahertz band. The decision sparked comments from some ministers that there should be a level-playing field for GSM operators. The EGoM had gone ahead with the telecom regulator’s suggestion and pegged the reserve price for 900 Mhz spectrum at twice the value of 1800 Mhz band.
The announcement of the reserve price sets the stage for the spectrum auction which is being eagerly watched by investors as a test case for the government’s commitment to resolve the crisis that hit the crucial telecom sector in the aftermath of the 2G spectrum scandal. This is the first time that the government is selling 2G spectrum through the open auction method after the Supreme Court cancelled 122 telecom licences earlier this year ruling that the process adopted in 2008 for allotting spectrum was flawed.
“Existing slab rate system for spectrum usage charges (SUC), as recommended by the EGoM, as the preferred option has also been approved by the cabinet,” Kapil Sibal said. This means, telecom operators would pay a 3-8% levy depending on the radio waves held by them although there were suggestions by ministers that there should be a level playing field for GSM players, who pay a higher levy compared to the dual technology operators.
The Cellular Operators Association of India (COAI), a lobby of GSM operators, however, said they were disappointed as the reserve price does not present a viable business case.
ON THE BLOCK
• The announcement of the reserve price sets the stage for the spectrum auction
• The budget for 2012-13 has estimated Rs 40,000 crore from spectrum auction
• The operators who bag spectrum will have to pay one third of the payment upfront
• The balance has to be paid in 10 equal installments