ibnlive » Business

TRAI sticks to controversial 2G auction plans

Reuters
May 14, 2012 at 06:05pm IST

New Delhi: India's telecoms regulator on Sunday reaffirmed most of its proposed rules for an auction of mobile airwaves, including a steep base price for bids, despite howls of protests by carriers in the world's second-biggest mobile phone market.

The Telecom Regulatory Authority of India (TRAI) had last month suggested an auction starting price that is nearly 10 times of what carriers had paid in a 2008 state grant process and also proposed limited number of slots in the auction.

Its comments on Sunday were in reply to "clarifications" sought by the Telecom Commission which decide on telecoms rules. The regulator's proposals are not binding on the government and a panel of ministers has the final say on the auction rules.

TRAI sticks to controversial 2G auction plans

The TRAI had in April suggested an auction starting price that is nearly 10 times of what carriers had paid in 2008.

India will sell second generation (2G) radio airwaves for the first time through an auction process to redistribute them among carriers. The auction, due by August, follows a Supreme Court order in February to revoke a total 122 zonal telecom permits awarded to eight carriers in a scandal-tainted state grant process.

The scandal was over alleged below-market-price sale of lucrative telecoms permits bundled with airwaves, which a state auditor estimated to have cost the government as much as $34 billion in lost revenue. Police have charged a total 19 people, including a former telecoms minister who had presided over the permit sale, and six companies in the case and their trial is ongoing.

However, the regulator's proposals for the auction have been slammed by the telecoms industry, who say it will add billions of dollars to their costs, hurting profits, and will force them to increase tariffs for their customers.

In comments released on its website on Sunday, the TRAI said the auction base price proposed for the 1800 megahertz (MHz) band was "in line with international prices" and that the airwaves would have higher value as a plan remove technology restrictions for using those would boost growth of premium mobile data businesses.

The TRAI also said its analysis suggested that the proposals would not adversely impact the profitability of carriers. It estimated call tariffs to increase by less than 4 paise a minute if its auction proposals are implemented. India has one of the world's cheapest call prices of as low as 20 paise a minute.

However, the regulator proposed lowering the starting price for airwaves in the 800 Mhz band by about a third from what it had suggested earlier, only in cases where spectrum availability in a telecom zone is less than 5 MHz, a move that would be a positive for the Indian unit of Russia's Sistema.

The auction is the last chance for the eight carriers including Sistema and Telenor's India units to win back their permits that are set to be revoked after the court order.

Established carriers like Bharti Airtel and Vodafone's local unit are not affected by the court's order, but are looking to buy more spectrum from the auction to feed their overstretched networks.

The regulator also stuck to its earlier proposal that just about a fifth of the total available spectrum in the 1800 Mhz band should be auctioned initially.

However, it suggested a second round of auctions advance to the current financial year, from its earlier proposal to conduct it during the year to March 2014, in what give some respite to carriers who fear the limited number of slots will drive up bid prices.

TRAI stood by another controversial proposal to refarm, or switch, superior-quality spectrum bands of established carriers with a relatively inferior band before their permits are renewed starting in 2014.

Latest

More from this section