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2G Spectrum: 8 Slots On Offer

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A high powered ministerial panel on Tuesday finalised broad modalities for auction of spectrum including schedule and quantum of airwaves to be sold, but it wasn't immediately clear if it decided on pricing of spectrum.

"Some decisions have been taken. We will let you know," Telecom Minister Kapil Sibal told reporters after the meeting of the Empowered Group of Ministers (EGoM) in New Delhi.

Sources said the EGoM has firmed up the schedule for the auction as well as the quantum of spectrum to be put up for bidding.

At least eight slots will be offered in the auction that is likely to begin sometime next month, they said, adding a minimum of 10 MHz of airwaves would be sold.

Shares of telecom service providers, led by Bharti Airtel and Reliance Communications, were battered on Tuesday ahead of the EGoM meeting.

Bharti Airtel settled 2.59 per cent lower at Rs 287.05 on the BSE. Intraday, the stock had plunged by three per cent to touch day's low of Rs 285.70. Reliance Communications closed lower by 1.19 per cent at Rs 62.05, while Idea Cellular shed 0.33 per cent to end at Rs 76.

Telecom giants Bharti Airtel, Vodafone and Idea Cellular had also sought Finance Minister Pranab Mukherjee's intervention to ensure that they are not asked to migrate to 1800 Mhz of spectrum. In a letter to the Finance Minster, they also said if the Trai proposal of spectrum refarming is implemented it may result in call rates going up by as much as 64 paise a minute.

The EGoM, headed by Finance Minister Pranab Mukherjee, deliberated on the reserve price for the auction recommended by sector regulator TRAI.

In all probability, a decision on the reserve price may be announced in the next couple of days, they said.

Telecom Regulatory Authority of India (TRAI), which was expected to make a presentation to the panel on the impact of its suggested pricing of spectrum on mobile phone tariffs, did not make any presentation to the EGoM.

The EGoM, sources said, may meet again sometime later this month to give final shape to the auction, which was necessitated after Supreme Court cancelled 122 2G licences, given in 2008 by the then telecom minister A Raja.

The apex court had asked the government to auction the spectrum by August 31.

The telecom industry has criticised steep minimum price of Rs 3,622 for a megahertz of airwaves to be auctioned and over Rs 18,000 crore price for pan-India operations as recommended by Trai.

The airwaves are crucial for telecom services as they are used to transmit signal for mobile telephony.

The industry feels that a high spectrum price will raise the tariff of telecom services in the range of 30 to 100 per cent.

Telecom Cos Seek FM's Help Against Refarming
Earlier, chiefs of telecom giants Bharti Airtel, Vodafone and Idea Cellular sought Finance Minister Pranab Mukherjee's intervention to ensure that they are not asked to migrate to 1800 Mhz of spectrum.

In a letter to the Finance Minster, they also said if the Trai proposal of spectrum refarming is implemented it may result in call rates going up by as much as 64 paise a minute.

Sectoral regulator Trai has proposed that existing operators migrate from current 800 MHz and 900 MHz spectrum to 1,800 MHz when their permits come up for renewal, at a fee discovered through auction.

"We request your most urgent, personal intervention to ensure that no further decision on re-farming 900 Mhz is taken, at the very least until, a thorough consultation is carried out," the telcos.

The letter was jointly written by Bharti Airtel CEO (India and South Asia) Sanjay Kapoor, Vodafone India MD and CEO Marten Pieters and Idea Cellular Managing Director Himanshu Kapania.

CDMA operators' body AUSPI, however, is in favour of spectrum refarming. Once accepted, CDMA players will have to use 1900 Mhz band instead of the present 800 Mhz band for transmitting signals for mobile services.

The telcos have commissioned a study through Analysys Mason to analyse the impact of spectrum refarming on the industry.

Citing findings from the report, the operators said if the incremental investment in refarming and spectrum costs are passed on to the consumer, "the average tariffs will go up as much as 64 paise per minute (30 paise due to refarming and 34 paise for spectrum investment)".

The study added that after moving to 1800 MHz, operators using 900 Mhz spectrum would need to replace 2.86 lakh base stations and install an additional 1.71 towers to provide equivalent coverage.

This would require an incremental capex of Rs 54,739 crore and incremental annual operating expenditure of Rs 11,762 crore.

An additional capex of about Rs 26,653 crore would be required to deploy new towers to support the incremental base stations, it added.

The report said the Trai recommendations (on refarming) will have a "substantial cost to the industry, result in an increase in retail tariffs and cause significant inconvenience to consumers, with no benefit to any involved stakeholders."

The operators said they would have to write off existing 900 Mhz assets that will cost an estimated Rs 22,310 crore.

The letter said the Trai recommendations had "hastily" concluded that refarming should be carried out progressively no later than expiry of existing licences in 2014-16.

This, it said, was done "misinterpreting and applying the Supreme Court order to reserve the spectrum vacated through licence cancellation for refarming."

Telecom Stocks Battered
Meanwhile, shares of telecom service providers, led by Bharti Airtel and Reliance Communications, were battered on Tuesday ahead of a meeting of the group of ministers that will decide on the base price for 2G spectrum auction.

Bharti Airtel settled 2.59 per cent lower at Rs 287.05 on the BSE. Intraday, the stock had plunged by three per cent to touch day's low of Rs 285.70.

Reliance Communications closed lower by 1.19 per cent at Rs 62.05, while Idea Cellular shed 0.33 per cent to end at Rs 76.

Tata Communications, however, managed to end in the positive territory. Its scrip was up by 0.82 per cent to close at Rs 220.45.

Market analysts said counters of telecom companies were under pressure as an increase in spectrum charge will put additional burden on the industry.

An Empowered Group of Ministers (EGoM), headed by Finance Minister Pranab Mukherjee, will meet later in the day to decide on the base price for the second generation (2G) spectrum auction.