New 2G pricing to benefit telcos, govt: Ranina

Telecom Regulatory Authority of India (TRAI) has proposed a base price for auction of 2G spectrum that is higher than the 3G auction price set in 2010, reports CNBC-TV18. 

The telecom regulator has proposed a base price at Rs 7000 crore for the 900 mega hertz ban, 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. HP Ranina, corporate tax lawyer believes this is a very good development and the objective of making the policy transparent has been achieved. “With the price being determined by the market, everybody will feel that it is a fair deal just as it was done in the case of the 3G spectrum” said Ranina. Below is the edited transcript of his interview with CNBC-TV18's Elan Dutta and Siddharth Zarabi. Also watch the accompanying video. Q: We are getting the basic recommendations from the TRAI your initial thoughts at this stage? A: My thoughts are that this is a very good development. I think the whole objective of making the policy transparent has been achieved. I am sure that this is in conformity with the Supreme Court guidelines. It is a very good scheme, which they have framed and I am sure the telecom companies also are going to be benefited.
The price will be now determined by the market and with that happening everybody will feel that it is a fair deal just as it was done in the case of the 3G spectrum. Q: If I can ask about the reserve price because this is the most crucial determinant of the market dynamics over the next 2-3 years. In terms of the reserve price at Rs 4500 crore which is Rs 1000 crore more than what was even decided for 3G and we have seen what has happened subsequently to 3G rollouts, do you think this is a bit excessive or it is a function of the value of spectrum which is being highlighted and underlined by the Supreme Court? A: I think they have tried to make it in conformity with Supreme Court guidelines, so obviously it is going to be expensive. In the sense that only those with deep pockets will be able to take advantage of this. But then if you want the government to benefit by it, if you want the spectrum to benefit the country, naturally the government would like to have the best possible price and this is the only way by which you can do that. Because any other type of restriction, control, limitation will prevent the government from raising the revenues. Q: With regards to eligibility issues although we don’t have full details of the report but as I understand there is no bar on anyone participating in this auction. The legal point is that at this point of time, the TRAI cannot extend the timeline, as far as the validity of the cancelled licences stand. We know that those licences stand to be cancelled on June 2, 2012. Post June 2, we already know that the DoT has sort additional time from the Supreme Court for conducting this auction, which will take a few months to pan out. What could be the likely way out for those new telecom companies who stand to be cancelled because if they end, and are not able to retain subscribers, their participation in this auction will effectively be almost ruled out? A: I agree that it is going to be a serious problem for the existing people and they will be at disadvantage. The only issue is, if they have to refund the money to the subscribers and if lot of funds have to be rolled out by these companies, certainly their financial muscles will be weakened to that extent. So, I do see the difficulty which these spectrum owners will face. Unfortunately with the Supreme Court having rejected their review petition, I don’t see anything coming out of it. They will just have to put up with this because it is going to affect them in a very substantial way.