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Last Updated : Apr 23, 2012 05:41 PM IST | Source: CNBC-TV18

Expensive 2G spectrum to hurt telcos' business: Experts

After burning fingers in the 2G and 3G spectrum allocation, telecom operators are now standing more to lose. Most experts are worried on Telecom Regulatory Authority of India's (TRAI) proposal of a base price for auction of 2G spectrum that is higher than the 3G auction price set in 2010.


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After burning fingers in the 2G and 3G spectrum allocation, telecom operators are now standing more to lose. Most experts are worried on Telecom Regulatory Authority of India's (TRAI) proposal of a base price for auction of 2G spectrum that is higher than the 3G auction price set in 2010.


For the the 900 mega hertz band, the telecom regulator has proposed a base price at Rs 7000 crore, which is twice the base price set for a 3G spectrum. For 700 megahertz band, it has been set at Rs 14,000 crore which is 4 times the 3G reserve price.


Expressing displeasure, Arvind Subramaniam, Partner, BCG is concerned that the new pricing will only hurt business of telecom companies. "To set a reserve price of more than the 3G price for a 2G spectrum of 1800 Mhz, at this point of time when the appetite for additional investment is limited, I struggle to see how the business cases for the operators will work.," he said in an interview to CNBC-TV18.


He explains that the incumbents will be cautious at this kind of a reserve price because this sets the benchmark for when their licenses come up for renewal and spectrum price they will have to pay. There are many licenses that are coming up for renewal from 2014 or 2015 onwards, Subramaniam points out.


Agrees Ashish Basil, Partner Telecom Practice, Ernst & Young reserve price for 5 megahertz of spectrum will be too high for telecom companies. Basil also points out that with the new pricing new companies may stay away from bidding.


However, HP Ranina, Corporate Tax Lawyer is cheering up the new proposal. According to Ranina, "It is a very good scheme which they have framed and I am sure the telecom companies also are going to be benefitted. The price will be now determined by the market and with the price being determined by the market I think everybody will feel that it is a fair deal just as it was done in the case of the 3G spectrum."


Also watch the accompanying videos.


Nasrin Sultana


nasrin.sultana@network18online.com

 

First Published on Apr 23, 2012 05:23 pm
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