Brokerage house UBS has criticized the Telecom Regulatory Authority of India‘s recommendations on 2G spectrum pricing, saying it completely â€œdefies economic rationale,â€ and feels the sector could plunge into litigation for the next few years if these recommendations are accepted.
Brokerage house UBS has criticised the Telecom Regulatory Authority of India's (TRAI) recommendations on 2G spectrum pricing, saying it completely "defies economic rationale," and feels the sector could plunge into litigation for the next few years if these recommendations are accepted.
Following is the UBS team's analysis of the key proposals of TRAI:
Spectrum pricing: TRAI has recommended that 2G spectrum pricing be based on 3G auction prices which we be believe is flawed as ignores the voice carrying capabilities of both the networks. Also, the business case of many operators is likely to become unviable if DoT accepts these recommendations.
Re-farming of 900MHz spectrum: TRAI has recommended replacing incumbent operator’s 900MHz spectrum with 1800MHz spectrum immediately. We believe the recommendations are retrograde as it completely ignores the investment an operator has made in its network over the years.
Quantity of spectrum: By restricting the amount of spectrum (1 block of 2x5Mhz spectrum) to be auctioned, TRAI is reducing the supply and trying to maximize revenues for government
Tower companies to pay 8% license fees: If implemented, then incrementally negative for incumbents as it reduces the valuations for their tower ventures.