Cost of spectrum set to go up
Nov 2nd, 2007 by admin
Telecom Dept Accepts TEC Reports, GSM Companies May Lose Valuations
New Delhi: The Telecom Engineering Centre’s (TEC) report released on Wednesday, which substantially tightened the subscriber-linked criteria for spectrum allocation, has been accepted by DoT. Since the price of spectrum is directly linked to spectrum efficiency, the move’s most significant impact is to instantly raise the value of spectrum.
The hardest hit are Bharti, Vodafone, Idea and Spice. The new norms are expected to play havoc with the valuations of these multi-billion dollar operators, also seriously damaging future investor confidence. The report, which has the GSM industry reeling in shock, has tightened subscriber thresholds over and above those recommended by Trai in its report of August 7. Trai had already tightened subscriber thresholds two to four times and COAI, an association of GSM operators, challenged this in TDSAT.
The categories that are worst hit are A, B and C as they move from 6.2 MHz to 8 MHz and then from 8 MHz to 10 MHz .
This serves to push up the value of the entry fee of Rs 1,651.57 crore fixed for UAS licence with 6.2 MHz of spectrum to at least Rs 5,000 to Rs 7,000 crore. This value is despite the increased capex that the companies may have to deploy for extracting maximum efficiency from spectrum.
Under the circumstances, both the Trai and TEC reports fly in the face of the telecom ministry’s attempt to deny the exchequer of legitimate revenues by shunning spectrum auctions and pushing through the existing first-come-firstserved allocation policy.
In fact, going by the 2001 parameters, the price of licence with the initial spectrum could be higher still. This is because the initial allocation of 4.4 MHz going up to 6.2 MHz guarantees a clear line of sight for spectrum, the lifeline for any mobile venture.
To illustrate: should the telecom ministry, which expects to get 20 MHz of fresh 2G spectrum from the defence services, auction it in four tranches, it could easily attract a value upwards of Rs 24,000 crore compared with Rs 6,604 crore (the current entry fee of Rs 1,651 crore x 4).
COAI has taken an aggressive stance. Its DG, T V Ramachandran said, “the undue haste, lack of transparency and departure from due process raises serious questions about the objective of the entire exercise”. Accusing the ministry of vendetta, the COAI says, “the general feeling in the industry is that it is being punished for approaching TDSAT on the issue”