Telecom Commission seeks clarity on 2G spectrum auction price

The sun rises behind a communications tower in New Delhi March 20, 2006.

NEW DELHI (Reuters) - The Telecom Commission is seeking clarity from the Telecom Regulatory Authority of India (TRAI) on some of its 2G airwaves auction proposals including the base price, which mobile carriers want to be cut by 80 percent.

R. Chandrashekhar, the top bureaucrat in the telecoms ministry, said the Telecom Commission did not have a view yet if the proposed near 10-fold rise in auction starting price from what carriers had paid in a 2008 sale was "too high".

"We wanted to understand the basis on which this reserve price has been arrived at ... what is the likely impact on tariff," Chandrashekhar said after a meeting of the Commission, the highest decision-making body within the telecoms ministry.

The airwaves auction must be completed by August after the Supreme Court ordered cancellation of all cellular permits awarded in a scandal-tainted 2008 sale process and asked the government to redistribute airwaves through open bidding.

In a joint letter to the telecoms minister last week, the heads of five carriers including the local units of Vodafone and Telenor, and market leader Bharti Airtel, sought an 80 percent cut in the proposed auction starting price.

They said the high cost of spectrum would push up tariffs by up to 30 percent.

The proposals from the TRAI, if accepted, will be a blow to carriers such as Telenor that were banking on the auction to win back the permits they are set to lose after the court order.

Telenor, which will have to spend at least $3.4 billion at the proposed price to have 5 mega hertz radio airwaves across all telecoms zones, said earlier on Monday that it would be forced to exit India if the proposals were accepted by the government.

Leading global telecoms lobby group GSMA has called the proposed auction starting price as "prohibitively high" and said it would curtail investments in networks.

Among other issues on which the Telecom Commission is seeking clarity from the regulator include the number of slots available in the auction, a proposed deferred payment mechanism and also a proposal to reallocate or refarm spectrum bands held by established operators.

The TRAI has proposed auctioning off 5 MHz spectrum in each telecom zone, less than a fifth of the airwaves to be made available after the cancellation of licences.

The Telecom Commission, which is likely to meet next on May 14, expects the regulator to clarify the issues in less than two weeks, Chandrashekhar said. The regulator's proposals are not binding on the government.

A panel of ministers has the final say on the auction rules.

(Reporting by Devidutta Tripathy; editing by Malini Menon)