Spectrum Trading-Severe loss to BSNL

As per the reports in “The Economic Times”, the guidelines for spectrum trading are being finalized by TRAI as per the direction of the E GoM. The guidelines, as per the report in the news papers are:

1.

Spectrum trading does not require the approval of the Government. Prior information 6 weeks before the agreement is sufficient.

2.

The spectrum obtained as per the administrative price decided by the Government prior to 2010 cannot be traded since it has not been acquired by the price determined in the market through auction. However, it can be traded on payment of the market determined price.

3.

The buyer has to comply with the prescribed limit and cannot exceed 25% of the total spectrum in the Circle or 50% of the total spectrum in a particular band in the circle.

4.

A transfer fee of 1 per cent of the transactional amount or 1 percent of the prescribed market price, whichever is higher, shall be imposed on all transactions.

These guidelines will create an insurmountable difficulty for BSNL. It was allotted 2G spectrum by Government without any payment considering its social responsibilities. The allotment was done before 2010. The private operators like Airtel, Vodaphone, and Idea etc have received 2 G spectrum as per the administrative price determined by the Government, prior to 2010. The Supreme Court has cancelled the 2G allotments done in 2010, and a part ofthe resultant spectrum was auctioned in 2012 as per the direction of other Supreme Court. BSNL is having 10 MHz 2G spectrum allotted before 2010 in almost all circles whereas the private operators are rarely having the 2G spectrum in 10 MHz quantity. Therefore it has more surplus spectrum that can be traded. But it is being prevented from doing so since the proposed guidelines are preventing the auction of spectrum allotted before 2010. Moreover, the license for mobile services was given to BSNL in 2000 only and it will last for 20 years until 2020. Therefore until 2020, BSNL can continue with its present quantum of 2G spectrum. In case BSNL wants to trade its’ surplus 2G spectrum, it has to pay the market decided rate for the 2 G spectrum in the auction held in the year 2012, which will be a huge amount (for 5 MHz for all the 22 circles, it will be Rs 14000 crores and even if the two circles Delhi and Mumbai where it is not present, are excluded, the amount will still be high. It is not possible for the BSNL facing an accumulated loss of around Rs 25,000 crores for the last 4 years. In the same way MTNL is also prevented from spectrum trading.

On the other hand, some private operators have obtained 2G spectrum in the auction held in the year 2012 and 2013. The license of Airtel, Vodafone etc are going to expire in many circles in the years 2014, 2015, 2016 on completion of 20 years. Therefore they have to participate in the auction to be held in February this year, and the Government has reduced the base price in the auction for their convenience from Rs 14000 crores to Rs 8824 crores for 5 MHz. Thus the private operators can get spectrum at a price determined in the auction based on the reserve price of Rs 8824 only for 5 MHz spectrum whereas BSNL has to pay the market rate based on Rs  14000 crores for 5 MHz, in case it wants to trade its’ spectrum.

Thus the spectrum trading guidelines said to be under preparation by TRAI are putting BSNL at a serious disadvantage.

Spectrum trading should not be allowed at all since Government is the owner of spectrum and if any Company is having extra spectrum, it can be returned back to the Government so that the Government can auction it again. If at all spectrum trading is to be allowed,BSNL should be allowed to trade its spectrum without any payment to the Government for the spectrum held by it, since BSNL is facing losses due to its’ shouldering several social responsibilities.