Spectrum Auction – Congress Govt Unable to Decide on – Reserve Price + Renewal + One Time Charge

July 23, 2012 · Author: · Category: telecom 

The PM of India, Dr. Singh, the silent witness to the Largest Scam Globally – Telecom Spectrum Scam in India is neither able to decide on the Reserve price for Spectrum Auction as mandated by the Supreme Court nor is able to come out with any transparency on Spectrum Renewal Charges and One Time Fees for existing Spectrum Holders.

The so called EGOM (Empowered group of ministers) made the following key recommendations: 1) Base spectrum price is fixed between Rs 140-160 bn (TRAI reco was Rs 180 bn); 2) Spectrum usage charge is fixed between 3-6% (TRAI reco was 1%); 3) Operators can make spectrum payments in 10 installments (25% of upfront payment for CDMA and 35% of upfront payment for GSM). The final call on exact spectrum price/usage charge will be taken by the cabinet.

Based on recent stock price corrections, we believe Bharti Airtel / Idea Cellular stock prices are implying that operators will have to pay the TRAI recommended price as a spectrum renewal price. We therefore think the stock prices would react positively if the reserve price is reduced and usage charges are kept unchanged. However we could see further downside risks (albeit not high) if the spectrum usage charge is increased to 6%.

Stay tuned for more coverage.

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