Mumbai: A day after recommending steep hike in spectrum prices, Trai chairman J S Sarma on Tuesday said the high price is not an attempt to stifle competition in the sector.

"Trai is not concerned sabout the level of competition and it is in no way is attempting to control the number of operators by assigning high reserve prices for spectrum," Sarma told a group of 120 investors and a clutch of large domestic and foreign fund houses on a conference call.

 On the possible impact of high spectrum prices, Sarma said: "The cost of spectrum to total cost per minute ratio is relatively low in the country. Our recommendations will only raise the average spectrum cost per minute by 1.5 paise on an average."

The investor call was hosted by the city-based securities firm Nirmal Bang Institutional Equities. He pointed out that the regulator had allowed a new operator (post-January 2008 licencee) to enter the market by allowing to it all 5 MHz of 1,800MHz spectrum if it is the highest bidder in a circle.


On the criticism that reserve prices for various spectrum bands are too high, Sarma said the auction process will decide that and all interested stakeholders may not necessarily agree with our price formula.

When asked what option Trai has if there are no bidders at the recommended price, Sarma termed the situation as hypothetical and said the bridge will be crossed only when they reach it.


On Monday, Telecom Regulatory Authority of India recommended base price of Rs 3,622 crore for a megahertz of spectrum at pan-India level which is around 10 times higher than the price for 2G licences in 2008 when A Raja was the Telecom Minister.

The regulator, whose recommendations are not binding on the government, valued 2G spectrum at about Rs 7 lakh crore, nearly seven times more than Rs 1.04 lakh crore that the government had received through auction of 3G spectrum in 2010.


On Tuesday’s SC order which granted time till August 31 to allot new spectrum, Sarma said as far as the SC order is concerned, it is clear the licences of the post-January 2008 licencees are to be quashed.

He also said there is nothing in the order on whether they should get their licences and spectrum back. "The new deadline will give the post-January 2008 licencees a fair chance for bidding," the Trai chief said.

When investors asked how he looks at the scenario when companies that lost the licence following the February 2 SC order may be outbid by financially stronger operators, Sarma said the principle of auction is that the highest bidder wins.


Sarma also said detailed processes were followed before making the spectrum price recommendations. He also emphasised that the staggered pay structure will help companies in raising funds.

"The stretched financials of the industry is the reason why we have suggested a deferred payment schedule," he said, adding the deferred payment schedule will also help banks to lend credit to telecom companies.

On licence renewals, Sarma clarified that operators will have to pay the latest market price for spectrum discovered in the latest auctions.

"If there is a reasonable gap between the end of the previous auction and the licence renewal dates, the price will be suitably adjusted," he said, clearly indicating that telecom companies will have to pay higher prices to renew their licences.

On the concerns about the rise in telecom companies' operating costs and potential of tariff hikes, Sarma said globally companies focus on data as a revenue driver, and the focus for the industry should be on driving value addition through data services rather than focus on voice tariffs.