NEW DELHI: The deadlock over the reserve price for third-generation radio frequency auction, vital for services such as video-calling and high-speed internet access on mobile phones, was finally resolved on Thursday when the empowered group of ministers (EGoM) headed by finance minister Pranab Mukherjee fixed it at Rs 3,500 crore. This means, any telecom company bidding for pan-India 3G spectrum will have to pay a minimum of Rs 3,500 crore as the auctions will begin at this price.
This is nearly Rs 500 crore lower than the base price that telecom minister A Raja and the finance minister had agreed to during a meeting with Prime Minister Manmohan Singh in June ‘09. At the same time, this is nearly Rs 1,500 crore more than the price specified by telecom regulator Trai, which had said the base price must be only Rs 2,020 crore.
The EGoM also decided that a total of five players will be allowed to offer 3G services in every circle, of which one slot will be reserved for state-owned telcos BSNL & MTNL. Again, this is in variation to Mr Raja and Mr Mukherjee’s earlier decision to have seven players per circle.
“The EGoM has decided that 3G radio frequencies will have a reserve price of Rs 3,500 crore. This is final. We have also decided that the reserve price for WiMAX spectrum will be Rs 1,750 crore. We hope to complete the auctions within 90 days from Thursday and we expect to get a minimum of Rs 25,000 crore from these auctions,” Mr A Raja told ET.
He also added that the Department of Telecom had presented three options to the EGoM—retaining the reserve price at Rs 2,020 crore as recommended by Trai, double it to Rs 4,040 crore as demanded by the finance minister, or agree to a figure of Rs 3,500 crore.
All telcos said they would bid for 3G spectrum: “We welcome the government’s decision to expeditiously complete the planned auction of 3G spectrum. We believe 3G will drive the wireless broadband revolution in both urban and rural India, contributing to inclusive growth. Bharti Airtel looks forward to participating in the auction,” Bharti Airtel CEO and joint MD Manoj Kohli said.
According to a communication ministry official, the logic for fixing Rs 3500 crore as the base price is that it satisfies The Department of Telecom which suggested Rs 2,020 crore as the base price and the finance ministry’s recommendation of Rs 4,040 crore.
The EGoM has arrived at this figure (Rs 3,500 crore) by doubling the reserve price for Delhi, Mumbai and category A circles and increasing it 1.5 times for Kolkata and category B circles retaining the current base price for category C circles.
The government had decided to refer the matter to an EGoM despite telecom minister A Raja and finance minister Pranab Mukherjee reaching a consensus in June 09 during a meeting with Prime Minister Manmohan Singh on doubling the 3G reserve price to Rs 4,040 crore and allowing up to seven players (including BSNL & MTNL) per circle to offer these high-end services. This was because, the new UPA government wanted to avoid any further controversy on the auctions of frequencies for 3G and WiMAX.
Asked on the EGoM’s decision, Prashant Singhal, partner and telecom industry leader, Ernst & Young said: “The increase in the reserve price for 3G auctions to from Rs 2,020 crore to Rs 3,500 crore, with a 4-slot bidding, could see some competition in lucrative markets, such as Metros, A circles, but may still not see a lot of bidding and traction in the B and C circles.
Over 75 per cent increase in the reserve price within a year’s time and that too with the economic recession could be a dampener to the excitement in the Indian telecom industry. The high base price would mean that operators would raise the cost of services to the consumer. That in turn could prove to be a negative to the growth of 3G in India.”
In addition to Mr Raja and Mr Mukherjee, the other members of the nine-member EGoM include home minister P Chidambaram, defence minister A K Antony, agriculture minister Sharad Pawar, law minister Veerappa Moily, information & broadcasting minister Ambika Soni, planning commission deputy chairman Montek Singh Ahluwalia and minister of state in the Prime Minister’s Office Prithviraj Chavan.
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