India's TRAI sets hefty price tag for 2G spectrum

India’s telecoms regulator, the TRAI, has proposed hefty reserve prices for the 2G spectrum blocks, due to be auctioned for a second time, later this year.

The reserve price is close to ten times more than what operators had paid in 2008, when the country held its initial spectrum sale. But this process was marred by corruption and India’s Supreme Court recently revoked all licences awarded. The TRAI has now recommended an auction base price of Rs 36.22bn ($687m) for every MHz of nationwide spectrum in the 1800 MHz band, compared with a price of Rs 3.8bn rupees in the 2008 sale.

The announcement led to shares of leading operators falling on fears that the big potential payouts will have major consequences on their profitability.

The proposed starting price for the 2G 1800MHz band is even higher than what operators paid for premium 3G spectrum in 2010. The base price for 3G spectrum was fixed at Rs35bn.

Shares in top mobile operator Bharti Airtel fell 7.5 per cent after the announcement to their lowest level since July 2010, while shares in the country’s number two operator Reliance Communications fell 3.4 per cent and fourth-ranked Idea Cellular dropped as much as 9.8 per cent

The regulator’s proposals are yet to be approved and a panel of ministers will have the final say on the spectrum rules.