High base price could slow down telecom growth in India

India's telecommunication revolution, which has seen more than 900 million mobile phone users, is likely to suffer a setback following the union cabinet's decision to fix a high base price for auction of scarce 2G spectrum.

The cabinet fixed the base price for auctioning of 5 MHz of radio waves in the 1,800 MHz frequency band at Rs14,000 crore for GSM operators and Rs18,200 crore for CDMA players, who will have to use 5 MHz in the 800 MHz band.

The Supreme Court, which cancelled 122 licences issued by the government to 2G operators following the unraveling of a scam involving former telecom minister A. Raja, had directed the government to finalise the process of re-auctioning the spectrum by 31 August. However, the government is unlikely to meet the deadline.

A ministerial panel headed by finance minister P Chidambaram is meeting in Delhi on Monday to plan a revised schedule for spectrum auction. The cabinet decided on the base price only on Friday.

The Telecom Regulatory Authority of India (TRAI) had earlier recommended a reserve price of Rs18,000 crore for auctioning of the 2G licences. The 1,800 MHz frequency is used by GSM operators, while the CDMA players use the 800 MHz band.

There were a total of 965.52 million telephone subscribers in India at the end of June, according to the TRAI. Total mobile subscriber base rose to 934.09 million, with private operators having a nearly 90 per cent market share. The fixed line subscriber base, where state-owned BSNL and MTNL have an 80 per cent market share, has been declining in recent months.