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TRAI dismisses speculation over spectrum auction

5 Feb 2014

The Telecom Regulatory Authority of India (TRAI) has dismissed claims aggressive bidding for spectrum in the 900MHz band will destabilise the sector, but criticised government decisions to set a higher reserve price than recommended by the watchdog, the Economic Times writes. Commenting on claims that excessive spectrum costs could leave operators hamstrung by excessive debts, TRAI chairman Rahul Khullar said that the sale ‘won’t set the industry back’, as operators’ finances are robust enough to handle the expenditure. After the second day of the auction, bidding for 900MHz spectrum in Mumbai rose 68.3% over the reserve price, whilst bids for frequencies in Kolkata and Delhi were entered at 46.8% and 47.4% respectively over base costs. Khullar also dismissed speculation that the entrance of newcomer Reliance Jio Infocomm into the voice market would spark another price war, noting that incumbent cellcos have been damaged by earlier bouts of intense pricing competition: ‘I don’t think any tariff wars are going to break out, quite simply because the industry has very badly burnt its fingers by it. When the thinking of these companies was customer acquisition and market share at any cost, price as a variable was your only instrument. Then it was a race to the bottom. Nobody consciously is going to do that.’

Khullar went on to criticise the government’s decision to levy a flat spectrum usage charge (SUC) of 5% on annual gross revenue on all new frequencies acquired in the current sale: ‘The SUC decision is not far-sighted… We are selling the right to use spectrum. If you have already paid for the right to use spectrum, why do you need a spectrum usage charge?’ However, the official conceded that the financial needs of the country are ‘so compelling at this point of time that any drastic reduction in SUC is not possible,’ but suggested that the charge should have been ‘as low as possible.’

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