Ministry of FinanceDepartment of Economic AffairsAllotment and Pricing of Spectrum30 January 2008 1.Minister for Communication met the Finance Minister todayon the subject of spectrum charges. Secretary, DoT, Advisor (Wireless) and I were present. The following is the gist of discussion.2.FM suggested that keeping in view lessons of experience,allotment of licenses and allocation of spectrum must be based onsolid legal grounds.3.It was agreed that the optimum numbers of operators per circle would be about seven. The International norm is about six. If there are more licensees per circle, it is possible that consolidationwill take place. Government should ensure that such consolidationhappens in a healthy way without any rent-seeking.4.It was noted that there is a mismatch in the demand andsupply of spectrum across circles. Redressing this mismatch willbe another policy imperative.5.FM said that for now we are not seeking to revisit the currentregimes for entry fee or for revenue share.6.The issue under consideration now is the regime for allocation of spectrum. The following aspects need to be studiedfurther:(i)The rules governing the allocation of additional spectrumand the charges thereof, including the charges to be leviedfor existing operators who have more than their entitledspectrum.(ii)Rules governing trade in spectrum. In particular, how canGovernment get a share of the premium in the trade?(iii)The estimate of the additional spectrum that may beavailable for allocation after taking into account: (a) theentitlement of entry spectrum of fresh licenses: (b) the
spectrum that needs to be withdrawn from existing operatorswho do not have the subscriber base corresponding to thespectrum allotted to them; and (c) the spectrum that may bereleased by Defence.(iv)We also need to check the current rules and regulationsgoverning withdrawal of spectrum in the event of: (a) notrolling over; (b) merger and acquisition; (c) trading awayspectrum.7.Secretary (DOT) will come for a meeting with us at 12 noonon 31.01.2008 to discuss these issues. Please make it convenientto attend the meeting.Sd/-(D. Subbarao)Finance Secretary30.01.2008AS(EA)
Discussion between Hon’ble FM and Hon’ble MOC&IT(30
th
January 2008) Salient points:
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DOT and MOC&IT best judge how to go about the issue;need to avoid legal issue
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Initial spectrum linked with service licence.
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Growth of service should not get stifled. At the same time,spectrum hoarding and trading in spectrum should not beallowed.
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Additional spectrum should be allotted at proper price; Needto discover right price for spectrum;
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How to ensure availability of adequate spectrum for newoperators as well as for growth of existing operators?
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In case of Mergers and Acquisitions, Government shouldget appropriate part of company valuation as premium for spectrum.2.The main issues are discussed below:2.1How to discover the right/appropriate price for additionalspectrum.The best method to get the right/correct/appropriate marketprice for the spectrum is the Auction. All other methods provideonly Administrative pricing of spectrum which can be reviewedperiodically based on the experience gained.One method could be to index the bids of 2001 for differentareas, with inflation since 2001 as well as the teledensity asprevailing 2001 and now. This amount can be taken as anequivalent of 4.4 MHz of GSM spectrum.Another method of valuation can be based on the populationof the area concerned, which provides the potential for totalteledensity.
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