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Spectrum Pricing: EGoM may cut reserve price, but hike revenue share
A high-powered ministerial panel finalising rules for upcoming mobile spectrum auctions has raised hopes of a cut in the minimum price of airwaves, after it ordered the telecom department to prepare a calculation sheet of two key variables— reserve price and revenue sharing.
Under the new plan, the reserve price for the upcoming auction will be lowered but the operators will have to pay a higher revenue share as spectrum charge. The idea behind this proposal is to lower the upfront cost for the mobile operators without impacting Government revenues over a 20-year period, according to sources in the Department of Telecom.
TRAI had proposed a reserve price of Rs 18,000 crore for 5 Mhz spectrum plus an annual spectrum charge of 3 per cent of the operator’s revenue. Telecom companies have opposed this proposal on grounds that this will force them to increase tariffs by 90 paise a minute.
To break the impasse, the EGoM, which met on Wednesday, has asked the DoT to work out a matrix showing various levels of reserve price and the corresponding proposed spectrum usage charge at every Rs 1,000 crore difference in descending order.
In other words, the DoT will have to suggest the revenue share percentage if the reserve price is reduced to Rs 17,000 crore or to lower levels. The DoT has also been told to work out the impact it would have on tariffs for consumer and the revenue accrued to the government. Mobile companies said that they would accept the formula if approved by the EGoM.

“Variable/graded spectrum usage charge will help the Government reduce the TRAI recommended reserve price to about Rs 10,000 crore, without causing any loss to the national exchequer,” said Mr S.C. Khanna, Secretary-General, Association of Unified Telecom Services Providers of India, an industry body representing the interest of Tata Teleservices and Reliance Communications.

A Mumbai-based GSM player also agreed with the EGoM’s new idea but said that the spectrum charges should be levied on the entire quantum of spectrum held by single operators irrespective of technology.
The EGoM will meet again on 27 July to further explore this option after the DoT gives its analysis.

“There was a discussion on two issues namely on spectrum usage charges and the reserve price. The discussion will be continued when the group will meet again on Friday,” Mr Kapil Sibal, Communications and IT Minister, said after the meeting.
Meanwhile, the Group, headed by the Home Minister, Mr P. Chidambaram, has decided to change rollout obligation for companies winning spectrum in the upcoming auction.
Telecom operators will have to roll out services up to block level headquarters in five years. Under existing norms, operators are required to reach their services to the district level only. 

“Under the new proposal, for those who acquire fresh spectrum, the rollout obligations would be to cover 10 per cent of the blocks in the third year, 20 per cent of the blocks in the fourth year and 30 per cent of the blocks in the fifth year,” the Telecom Minister, Mr Kapil Sibal, said after the EGoM meeting. He added the obligations apply to both existing and new players.- Source: The Hindu Business Line
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