Telecom Regulatory Authority of India's much-awaited report on spectrum allocation and pricing was expected to shed light on the telecom minister's arbitrary giveaway of 2G licences at throwaway prices in 2008. Instead, the telecom regulator seems to have, rather unfortunately, endorsed A Raja's rather dubious handing out of 2G spectrum by saying that it simply wasn't feasible to conduct auctions in the 800-1,800 Mhz spectrum band. Trai, therefore, believes that telecom minister A Raja's actions did not cost the exchequer much money at all, certainly not the Rs 60,000 crore that is often bandied about by critics of the telecom minister. After having set out this logic, Trai peculiarly goes on to suggest that from now on 2G spectrum could be priced at a level discovered through 3G auctions, thereby endorsing auctions as an appropriate way to discover prices. But the regulator ought to have applied the same logic on auctions and price discovery to the 2G licences that were handed out in 2008 without auctions, at what were 2001 prices.
There can be no defence for the manner in which the telecom ministry gave out the 2G licences to Unitech, Swan et al. The fact that these were given at below market prices was more than evident when Unitech and Swan sold out stakes to mobile operators Telenor and Etisalat at prices that were many multiples of the fee paid for the licence and spectrum. Given that Unitech and Swan had set up none of the infrastructure necessary to actually operate 2G services, the buyers were essentially paying what they thought was a good price just for the licence and spectrum. So, Trai's contention that no significant revenue was lost to the exchequer or that there would be insufficient buyers in an auction for 2G spectrum is simply not borne out by facts. Trai also struck a blow on the biggest existing service providers by mandating that they all pay a charge for spectrum that they hold beyond 6.2 Mhz. Again, the price to be paid will be linked to the discovery made at the 3G auctions. This is ostensibly to create a better level playing field for all operators. However, given that Trai has overlooked the biggest distortion in the telecom sector in recent years—the giveaway of 2G licence at a pittance by A Raja—its claims on bringing a level playing field elsewhere will be met with suspicion.
