Government plans to ask mobile phone companies to pay market rate for 2G waves

The government plans to ask all mobile phone companies to pay auction-discovered price for the 2G spectrum they hold for the remaining period of their licences, as it seeks to create a level playing field, said a top telecom ministry official.

The move will send shockwaves among existing operators as back-of-the-envelope calculations suggest these companies will have to shell out several thousands of crores if the Cabinet approves the policy change proposed by the communications ministry.

The DoT will present a note to the Cabinet on this issue next week, said the official. “Telecom companies that lost permits following the Supreme Court order must pay a minimum of Rs 3,622 crore for every unit of 2G airwaves in the upcoming auctions if the telecom regulator’s pricing is accepted by the Empowered Group of Ministers. But the operators whose permits were not quashed have not been subject to any market-determined fee for the airwaves they currently hold.

The method we are proposing will ensure all operators pay the same price for airwaves,” the official added. This official further said incumbents such as Bharti, Vodafone and Idea, and dual-technology players such as Reliance Communications and Tata Teleservices could pay the auction-determined price for the entire spectrum they have in the 1800 MHz band and extend the validity of their licences by 20 years.

TRAI Told to Study Impact

“But this is not applicable to the 2G spectrum held by incumbents in the 900 MHz band. Here, they have to pay the auction-determined price only for the remaining tenure of the licence. This band will be refarmed (redistributed to all companies through an auction process) when mobile permits come up for renewal beginning 2014,” said the official.

Incumbents such as Bharti, Vodafone and Idea hold 2G spectrum in the 1800 MHz band in more than half the country. In the remaining regions, these companies have airwaves in the 900 MHz band. All 2G airwaves held by Reliance Communications and Tata Teleservices are in the 1800 MHz band.

The DoT has asked the Telecom Regulatory Authority of India to study the impact this proposal will have on tariffs. This is part of the seven-point reference made by the department to TRAI on Tuesday.

Last week, the Telecom Commission, the highest decision-making body of the communications ministry, failed to reach a verdict on the reserve price recommended by TRAI.

The commission decided to ask the Empowered Group of Ministers on spectrum auction, headed by Finance Minister Pranab Mukherjee, to fix the reserve price.

It also decided to ask TRAI do a cost analysis of the impact its spectrum-pricing proposals will have on customers, companies and the government’s revenues, and present it to the panel of ministers so they can take a decision, Telecom Secretary R Chandrasekhar had told ET.