TRAI okays DoT proposal to hike base price for 3G auctions

By Sandeep Gurumurthy, CNBC-TV18

Nripendra Mishra, Chairman of the Telecom Regulatory Authority of India, or TRAI, has agreed to the Department of Telecom, or DoT, proposal to hike base price for 3G auctions. He added that all successful 3G bidders will have to match the highest bid.

Earlier, TRAI had recommended minimum bid price of Rs 1,400 crore for pan-India, while the DoT had proposed to hike base price for the auction to around Rs 2,200 crore.

The telecom regulator has accepted DoT's proposal to hike the base price for 3G auctions.

DoT had wanted to increase the base price from Rs 1,400 crore to about Rs 2,200 crore for a pan-India licence.

DoT also wanted successful bidders to match the highest bid. That proposal has also met with the regulator's nod. But differences remain over allowing new foreign players to participate in the auction. However, TRAI clarified that it is upto the DoT to take a final call on the issue. 3G guidelines are likely to be announced later this month.

The new policy will have the base price of 3G auctions at Rs 2,200 crore. That is what the DoT wanted and it has been accepted by TRAI. Also unlike the earlier norm, the new players will also be allowed to bid with the existing players.

Earlier the base price was apparently auctioned for Rs 1,400 crore and the auction was supposed to be restricted only to existing license holders, essentially meaning only to existing operators. New entrants or operators say like an AT&T or a Verizon cannot technically come in and bid for 3G spectrum. Moreover, all the bidders had to match the bid of the second highest bidder.

The difference of opinion on global auction of 3G still exists between DoT and TRAI. The DoT wants it, but TRAI wants to restrict it to the existing license holders. But the Chairman has hinted that he is going to put his foot down and the DoT is free to take its final call and to go in for a global auction.

However, TRAI has agreed on the DoT proposal on 3G auctions and all the bidders have to match the highest bidders. This is the policy that is going to be taken up first by the Telecom Commision, which is the apex decision-making body of the DoT, after which it will be cleared by the Telecom Minister. The entire policy is expected to come out by the end of the month, which will pave the way for 3G auctions finally.

The entire GSM lobby was opposed to the recommendations in the first place last year and players like Bharti Airtel and Vodafone found the earlier bid price i.e. Rs 1,400 crore to be a little high for 3G auctions.

The players would have found this amount a little more acceptable. But Rs 2,200 would be a hard hit for them to accept.  If the bid was restricted to existing players, then there would be very few players vying for the cream pie.

If it was only the existing players then they would have to bid for 5 MHZ which is available for auction. Now, these players will have to compete with the likes of AT&T, which is desperate to enter India. So, there is a serious threat of a bidding war. The fact that new foreign players are allowed to bid is definitely a negative for existing GSM players.