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Next day, the Cellular Operators Association of India (COAI) members came out with guns blazing, saying that tariffs could double, countering the Trai argument that tariffs could increase only by 2-3 paise per minute.
The tussle is over the reserve price to bid for mobile spectrum. Trai suggested that spectrum in the 1800 MHz band be auctioned at a base price of Rs 3,622 crore/MHz. However, with Trai recommending a lowering of spectrum usage charges to a flat 1 per cent from the current 3-8 per cent (depends on the amount of spectrum held), it seems unlikely that the government would go against the Trai recommendations.
Besides, while the Supreme Court cancelled eight licences, Trai has put up only 5 MHz of the 1800 MHz band spectrum in each circle for bidding initially. It plans to have another auction later based on the discovered price in the first auction. Says J.S. Sarma, chairman, Trai: "During this year itself, they would be in a position to have another auction of 1800 MHz band. So, new operators can come in there too."
That remains to be seen as Trai has talked of only one auction. The moot point is that there is an average of 26 MHz of spectrum in each of the 22 circles across the country in the 1800 MHz band. Telecom operators argue that by creating an artificial scarcity of spectrum, it would mean that at best only one new operator would be able to get spectrum in a circle. Says Rajiv Bawa, chief representative officer, Telenor India: "This runs counter to what the Supreme Court had said."
That could change in the coming days as the DoT is trying to get spectrum vacated by defence. Once that happens, at least three operators would be able to get spectrum in the 1800 MHz band in a circle. It remains to be seen whether the DoT would want a single or multiple auction of 1800 MHz band spectrum within the year.
Trai provided for only one bidding slot in the 1800 MHz band spectrum (at the discovered price in the auction) to accommodate incumbent operators who hold spectrum in the 900 MHz band. The idea is to re-farm spectrum in the 900 MHz band as licences expire starting 2014. The 900 MHz band would then be auctioned at a base price that is double the reserve price for the 1800 MHz band — Rs 7,244 crore per MHz. Says Kapoor: "This is not re-farming but redistribution of spectrum. The immediate impact will be that large parts of rural India will lack mobile coverage."
However, despite the objections raised by the GSM operators, these are early days. It will depend on what the EGoM decides, based on the recommendations of DoT. That could be the decider in the coming battle for spectrum.
(This story was published in Businessworld Issue Dated 14-05-2012)