Telecom Operators Can Mortgage Spectrum

By Author: Craig Streward
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The Empowered Group of Ministers (EGoM) on telecom, which met on July 12, decided to allow banks to auction spectrum mortgaged to them by operators in case of a default, but did not arrive at a decision on the contentious issue of spectrum pricing. It is likely to meet again on July 16.

It also decided it would try to meet the Supreme Court’s deadline of August 31, despite a fresh deadline for the appointment of the auctioneer and also the release of the information memorandum for the auction only on August 22, instead of the earlier decision for August 6. This is the first meeting of the EGoM under the chairmanship of Home Minister P Chidambaram, after it was reconstituted following the resignation of Pranab Mukherjee as the finance minister.

The three-hour meeting also went through a presentation by the Telecom Regulatory Authority of India (TRAI). The latter said the impact on rates of the high base price it had recommended would be no more than 5-15 paise a minute.

This is far lower than what operators had presented to the government, of an average of 26 paise per minute, going up to a staggering 90 ...
... paise per minute. Earlier, the regulator under ex-chairman J S Sarma had said the impact on costs would be no more than four to six paise a minute. Briefing the media, Telecom Minister Kapil Sibal said the architecture of the auction will be discussed with the Department of Telecommunications (DoT).

Earlier, DoT had objected to banks auctioning any spectrum and had said the auction process, because of its complexities, should be undertaken by itself. The mortgage of spectrum will allow the operators to get funding from banks. Following the Supreme Court directive, which saw 122 telecom licences being cancelled, the banks were apprehensive to lend to telecom operators. However, no decision was taken on roll out obligations, though there was full discussion on the issue.

In the last meeting of the EGoM in June, it had decided to auction a minimum of 10 MHz of 2G spectrum but put off a decision on the contentious issue of determining the reserve price.

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