India asks regulator to clarify on 2G auction prices, after protests

Telenor and other companies had objected to the high reserve price for the auction

India's Telecom Commission has asked the country's telecom regulator to clarify on proposed reserve prices for an auction of mobile spectrum, following protests from companies and industry associations that the prices were too high.

The commission wants to understand from the Telecom Regulatory Authority of India (TRAI) the basis for fixing the reserve price, besides seeking clarifications on other proposals related to the auction, telecom secretary R. Chandrashekhar said in Delhi on Monday, according to reports.

Ahead of the meeting of the Telecom Commission on Monday, Norwegian telecom operator Telenor said it would be "almost impossible" for it to participate in a proposed auction of spectrum under conditions recommended by TRAI.

If it does not bid in the auction, Telenor may in effect exit India as it will lose all its 22 mobile licenses in the country, after a Supreme Court order canceling 2G licenses issued in 2008 comes into effect by Aug. 31.

Concluding that there were irregularities which helped companies bag the licenses at basement prices prevailing in 2001, the court ordered the cancellation of 122 licenses across 22 services areas, and ordered the telecom regulator to recommend the procedure for the auction of the spectrum that was released as a result.

However the proposed terms of the auction have not been found favorable by foreign companies like Telenor, which bought into Indian companies that bagged the licenses, and now stand to forfeit their licenses. Many of them hold that they were not instrumental in their Indian joint ventures bagging the licenses from the government, but only invested later in these companies.

Tor Odland, a Telenor spokesman, said that some consideration should be given to companies that lost their licenses as a result of the ruling, as an auction open to all players will favor large incumbents, and not bring competition to the market.

The reserve price fixed by TRAI for the auction is also several times higher than what was paid for the spectrum in 2008, which some of the operators object to.

The 5 MHz that TRAI proposes to auction in the 1800 MHz band in the first phase is way below demand and will artificially inflate prices, according to analysts. TRAI said the limited auction would help arrive at the market value of spectrum for subsequent auctions.

A TRAI proposal to offer spectrum in blocks of 1.25 MHz each will also lead to inefficient networks, Odland said. "You need a minimum of 5 MHz to run an efficient network," he added.

TRAI's proposed reserve prices for upcoming spectrum auctions are so prohibitively high that they will inevitably curtail mobile operator investment in mobile broadband infrastructure and increase prices to consumers, GSMA said last week. Local operators' associations said the new policies and the pricing proposed by TRAI would hit an already ailing telecom industry in India.

Telenor has meanwhile taken a write-down on its remaining Indian assets, describing its as a precautionary measure. After the NOK 3.9 billion ($682 million) write-down, Telenor will not have further accounting exposure related to India as of March 31, 2012, it said. The company had earlier this year written down NOK 4.2 billion related to licenses and goodwill in India.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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