The empowered group of ministers, or EGoM, on telecom has suggested two options of Rs 14,111 crore and Rs 15,111 crore as the reserve price for auction of spectrum, sources said on Monday. This is the minimum price at which the auction of 2G spectrum takes place. The panel has recommended the base auction price as a percentage of net present value of the spectrum.
Jaideep Ghosh, partner, KPMG Advisory Services, told NDTV Profit that the suggested price for spectrum is still very high. Talking about the tariff impact, he said, “I would expect that the tariffs would go up. Well, it may not go three times high. So, the tariff will firm up and the market will determine it.”
Below is the transcript. Watch the accompanying video here.
- What would be your thought?
- If you look at it on a standalone basis, there is no uncertainty, just mobile wireless spectrum getting auctioned even at the lower end of the suggested base price, which is Rs 14,000 crore and it looks unbelievably high. Considering the entire history of spectrum and some of the balancing act the panel has done in terms of upfront payment, etc; it is a welcome move but also not as in terms of how the industry wants to see the reserve price to be for the spectrum.
- What's your analysis of the kind of tariff impact it can have?
- Tariff in India has been really low. In the recent one-and-a-half years we have seen 15-20 per cent firming up of the basic voice tariff in the mobile space. I expect that because of the sheer competitiveness in the market and the fact that the tariff is low and EBITDA margins have been hit for the established operators, I would expect that the tariffs would go up. Well, it may not go three times high. So, the tariff will firm up and the market will determine it.
- The industry response on the usage charges was not particularly positive. Any thought on that?
- As I said that it is a balancing act. On one se??, we are saying that the government needs revenue coming from this sector. So, there were certain recommendations of TRAI, which were opposed by the industry. Now we also have to remember that the 3G bid was at a very high price few years back. Now if you see the base price of the spectrum, they will be bidding on this. It has to be reduced from Rs 18,000 crore to Rs 14,000 crore. So, the reduction in the government revenue is expected unless the bids are irrational, which is not expected this time. There are only a few parameters which are in the hands of the telecom ministry, the department of telecommunication, etc. One is that you reduce the base price of the spectrum and hence, the winning price for the auction will be lower than the previously discussed prices. Then you increase the spectrum fee from 3-7 per cent to a higher range.
So, the revenue from the government remains stable and predictable and it is not an upfront charge coming up on the operator to be paid in the next 2-3 months when the auction happens. So it is a balancing act between enhancing the spectrum usage charges, but reducing the auction base price, so that upfront payments are less. If the winning price is say Rs 15,000 crore, then you pay Rs 5,000 crore, which is also quite high. So, from a 10-year perspective, there is no major change. But it eases out the process for the operators.