Upcoming spectrum sale could fail: Finance ministry

The finance ministry has warned that the upcoming spectrum sale process could fail because of the telecom department’s proposal to make it compulsory for all operators to match the auction-determined price for their existing 2G airwaves for the remaining period of their licences.
“The proposal for prospective charging for the spectrum being held by existing operators for the remaining period of their licence at the auction-discovered price is likely to suppress bids and might even result in the failure for the auction in the worst case,” said a note prepared by the economic affairs department of the finance ministry on June 22.
The finance ministry has also asked the telecom department (DoT) to clarify how it could seek Cabinet approval to impose this one-time fee on a prospective basis, when this issue is part of the presidential reference in the Supreme Court.
Economic Affairs Secretary R Gopalan, who has written the note, has pointed out that DoT’s move to proceed with ‘prospective charging’ for airwaves held by existing operators is at variance with its own decision to await the outcome of the presidential reference before imposing a similar auction-determined charge with retrospective effect for all airwaves held by incumbents beyond the contracted limit of 6.2 MHz.
As ET had reported earlier this month, DoT has circulated a Cabinet note that proposes to charge all players the auction-determined price for their existing 2G airwaves. The note said this ‘onetime fee’ was being imposed on all existing players to creating a ‘level playing field’, and added the government had the right to amend the terms and conditions of the licence anytime.
But Gopalan has said the government could only modify the terms and conditions of mobile permits in public interest, or in the interest of national security or for violations of telegraph rules.
“Whether the stated ground of providing a level playing field among the existing and new players is of such overriding public interest to warrant the change in licence terms and conditions will be open to litigation,” he added.
Industry calculations show if the Cabinet approves the telecom department’s proposal for prospective charging, the government can garner over Rs 100,000 crore from existing operators such as Bharti Airtel, Vodafone, Reliance Communications and Tata Teleservices.
But this proposal has been sharply criticised by AUSPI, the industry body that represents dual-technology operators, which says it will impact its members such as Reliance Communications and Tata Teleservices far more than GSM telcos, whose licences are set to expire from 2014 onwards.