TRAI set for new 2G spectrum pricing proposals; Reliance gets all-clear on Swan Telecom investment - Mobile World Live

TRAI set for new 2G spectrum pricing proposals; Reliance gets all-clear on Swan Telecom investment

18 JAN 2011

The Telecom Regulatory Authority of India (TRAI) will shortly publish new proposals on pricing 2G mobile spectrum, says chairman JS Sarma. The regulator will make an announcement “in the next few days”, according to Sarma. TRAI’s original recommendation on 2G pricing in May last year said operators should pay a one-off fee for holding more than 6.2MHz of 2G spectrum. The size of the fee was determined by 3G auction prices. However, it is not clear whether the regulator will put forward a similar approach this time around. When asked whether 2G pricing will be linked to that of 3G in the new proposal, Sarma said “I do not know”, according to The Times of India. The original TRAI proposal was controversial with leading cellular operators who were unhappy about the size of the resulting charges. They will be watching closely again.

The regulator’s new proposal is additionally significant in the context of the country’s 2G licensing scandal. The scandal was kicked off by a report from the Comptroller and Auditor General of India (CAG) two months ago that claimed the taxpayer had suffered as much as INR1.76 lakh crore (US$40 billion) in lost revenue because of how 2G spectrum was licensed. The CAG used TRAI’s recommendation from last year in its calculations, points out The Times of India. The country’s new Communications Minister Kapil Sibal (his predecessor was forced to resign over the 2G scandal) has questioned the calculations behind CAG’s figures, describing the figure of INR1.76 lakh crore as “utterly erroneous”. Key to TRAI’s original proposal was the assumption that 2G and 3G enjoyed nearly the same spectral efficiency. But Sibal argues that 3G is three times more efficient than 2G with the result that the potential loss figure is lower. In addition Sarma has said that TRAI’s recommendation on 4G will probably be ready by the middle of 2011. The regulator said it has started work on a consultation paper on the subject. 

Separately, India’s Ministry of Corporate Affairs has cleared leading cellular operator Reliance Communications of allegations that it held more than 10 percent of Swan Telecom (now Etisalat DB). The ministry said Reliance never held more than 9.9 percent of the company. Indian law sets a limit on companies owning cross shareholdings in rival businesses. If Reliance had held greater than 10 percent of Swan it would have been in breach of that law because of its existing cellular business. Swan Telecom won 2G licenses in January 2008 and then brought in Etisalat as a shareholder. Telecom Minister Kapil Sibal ordered an enquiry into Swan’s ownership following allegations that Swan acted as the front company in the auction for Reliance Communications.

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