Why is Government Creating Artificial Scarcity of Spectrum ?

August 6, 2012 · Author: · Category: telecom 

The Cabinet of the Dr Manmohan Singh government scarred badly in series of scams took yet another decision on the reserve price of the Telecom Spectrum, which is going to make matters worse for the Indian Telecom Sector. The cabinet has deferred any decisions on one-time spectrum fee on incumbents and pricing beyond 6.2MHz

In addition to the pricing norms, the cabinet has taken the decision to allow operators to pay 30% of the auction value upfront and pay the remaining amount in 10 equal annual installments after a moratorium of 2 years. The SUC / Spectrum Usage Charges will continue to remain as per existing norms in the range of 2-6% of AGR. In our view the new payment conditions will significantly ease the pressure on balance sheets/cash flows of the operators, from the earlier proposed norms. On the flip side, this could potentially keep smaller operators in the fight.

Why Artificial Scarcity of Spectrum ?
The Supreme Court’s order had cancelled about 5-6 licenses per circle, the government has finally decided to put up only 3 full spectrum blocks (2 in 1800MHz and 1 in 800MHz) up for the auction. While this does create an artificial scarcity in the market (and could be subject to litigation).

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