Govt sets 2G spectrum reserve price at Rs 14,000 crore

Business

oi-Sunil

By Sunil Fernandes

Published: Saturday, August 4, 2012, 9:24 [IST]

In what maybe a blow to telecom operators, the government has set a steep reserve price for the 2G auction of spectrum at Rs 14,000 crore for 5 megahertz across the country.

The Union Cabinet also approved the recommendation of EGoM for reserve price for 800 MHz band at 1.3 times that of 1800 MHz band. Existing slab rate system for Spectrum Usage Charges (SUC), as recommended by EGoM, as the preferred option has also been approved by the Cabinet.

It may be recalled that the Telecom Regulatory Authority of India had suggested a base price of Rs 18,000 crores, which was considered very steep. In fact, even the price of Rs 14,000 crores is considered extremely high by telecom operators, who now warn that tariffs to consumers are likely to go up.

Analysts opine that some of the companies may not even bid at such a high reserve price. Telecom operators are already passing through a difficult phase and some are saddled with losses, while others have huge debts on their books.

The only silver lining for the industry is that it has been growing at a frantic pace. However, industry observers believe that should tariffs be raised due to the higher reserve prices for 2G, one could witness a decline in volumes and profitability.

It will be interesting to see when the bidding process will be completed and how many companies would bid at such a high reserve price.

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