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Telecom Commission didn’t consult with telcos prior to hike in upfront payments: Telenor India

cmn_Telenor office

Telenor India has criticized the Telecom commission’s recent approval of base price for the crucial 700 MHz spectrum and its decision to hike upfront payments to 50% from the earlier 10% proposed by the TRAI for both 700MHz and 800 MHz band.

A spokesperson from Telenor India told MediaNama that the Telecom Commission’s decision to hike initial payment amount “come as a surprise to the telecom operators as this increase was not discussed during the consultation process with the regulator.”

For the upcoming auctions, TRAI suggested that telcos could first pay 10% of the bid amount; the balance 90% could be paid over 18 years with 18 equal annual installments, along with interest. While, last week the telecom commission hiked the upfront payment to 50% and gave its approval for spectrum rates suggested by the TRAI in January.

Higher rates could hurt industry: According the Telenor, a higher payment percentage along with a service tax of 14.5% might put additional financial burden on industry. “The increase in cost of capital will discourage operators to bid aggressively in the auctions and will also impact the business viability of the acquired spectrum,” said Telenor. It added that the earlier option with a 10% upfront payment scheme could attract more telcos to place bids and create a better level playing field.

Spectrum auctions crucial to operations: Last month, The Telenor Group posted an operating loss of 3,100 million Norwegian Krone (NOK), approximately Rs 2,530 crore for its Indian operations during its first quarter results, and hinted on suspending operations in India if the upcoming spectrum auctions turns out to be costlier. Telenor global CEO Sigve Brekke said that the company’s long terms presence in India is subjected to its ability to secure additional spectrum (from upcoming auctions). He also added that Telenor is not able to compete with current spectrum portfolio it holds in India.

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TRAI’s reserve price are too high
In January, TRAI had recommended (pdf) a base price of Rs 2,873 crore per MHz for the 1800 MHz frequency band (2G spectrum), which is 31% higher than base price the government fixed in the 2015 auction.

It also stated in the report that the pricing of Rs 11, 485 crore for the 700 Mhz band is the highest reserve price fixed for any band since the auctions began in 2011, and could fetch the government Rs 5.36 lakh crore if frequency is sold at that rate.

It is also worthy to note that last year’s spectrum auction fetched bids worth Rs 1.1 lakh crore for the government, and telcos had requested the TRAI to defer the sale of the 700 MHz spectrum, stating that the ecosystem for this band had not yet developed.

Airtel doubtful against exorbitant reserve pricing: Gopal Vittal, Airtel India CEO said while answering a query from analysts that the price that has been proposed for 700 MHz just makes it ‘very expensive for them’, and that they won’t be able to afford to buy that spectrum at that price. “It has to be balanced with the fact that ecosystem that you have on 700 MHz in terms of devices and chipset is still very nascent,” added Vittal. Note that is one of the top three telecom operator in the country in terms of active connections.

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