Ministers’ group on 2G likely to decide on reserve price this week

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The crucial meeting of the Empowered Group of Ministers on 2G spectrum pricing will be held this week.

This will probably be the last major decision by the eGoM headed by Finance Minister Mr Pranab Mukherjee. The Group is expected to take a decision on the reserve price for the forthcoming 2G spectrum auction.

Other issues

Other issues related to the auction have already been decided. In the 1800 Mhz band, a minimum of 8 blocks of 1.25 Mhz each will be put for sale. In addition, another three blocks may be made be put on the block depending on availability after reserving spectrum for re-farming.

This would mean that there will be a total of 11 blocks of 1.25 Mhz each. Incumbent players such as Airtel and Vodafone will be allowed to buy a maximum of two slots while the new entrants can buy up to 4 slots. New players will be permitted to buy an additional slot to take their total to 6.2 Mhz. This is good news for companies like Telenor who can hope to get adequate spectrum through the auction. New player’s 2G licences will be cancelled in September.

For CDMA players, three blocks of 1.25 Mhz each in the 80 Mhz band will be put up for sale. In addition, there could be another block of 1.25 Mhz made available for new players.

GSM frequency

Russia’s Sistema will hope to win back at least two slots through this auction without much competition as most of the new players are looking to bid for GSM frequency. Incumbent players will be allowed to bid for only one slot while new operators can take up to three slots.

The GoM has also decided to liberalise spectrum which means winning operators will be able to offer all types of services. For example, Sistema can buy spectrum in 800 Mhz and start offering 3G services.

But whether these companies participate or not will depend on reserve price. The TRAI had suggested Rs 18,000 crore as the base price for 5 Mhz spectrum pan India. All the prospective bidding companies have rejected this pricing and are hoping that the eGoM will bring some relief. According to Government functionaries, one of the options being looked at is to ask operators pay for a ten year period instead of twenty, in which case the price could be lowered.

(This article was published on June 18, 2012)
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