New proposal to price spectrum

In a move that would have a serious financial impact on telecom companies, the Telecom Commission has finalised a new proposal to price spectrum.

A cut-off date is to be determined till which incumbent operators allotted spectrum beyond 6.2 Mhz would have to pay for it on a pro-rated 3G spectrum price or a Telecom Regulatory Authority of India (Trai)-determined price, whichever was higher. The regulator had priced spectrum at an average of 1.65 times the 3G price.

The commission's decision will have to be cleared by communications minister Kapil Sibal. After this, it is likely to go to the Cabinet.

For the period beyond the department of telecommunications-determined cut-off date, to be fixed later, the price of the additional spectrum is to be determined by an auction.

Incumbents would not have to pay retrospectively for the spectrum beyond 4.4 Mhz. However, after the cut-off date, all spectrum already allocated or to be allocated beyond 4.4

Mhz will be fixed on the basis of the auction price till the end of the licence period.

The commission has made it clear that renewal of licences of incumbent operators will be permitted, but they will have to pay the auction price for the spectrum.

It has also accepted the merger and acquisition recommendations of the regulator, under which mergers would be allowed where the market or revenue share of the merged entity was not more than 35 per cent.

But where the market share is between 35 to 60 per cent, Trai's clearance will be required. The commission has asked the regulator to prepare specifications for such mergers.

Analysts had earlier assumed incumbents would have to fork out Rs 17,000 crore (Rs 170 billion) for the additional spectrum beyond 6.2 Mhz. Under the new formula, they might have to pay more.

Many experts say incumbents are bound to go to the courts, as they have opposed such high prices.