In my column, on 15th February, 2016, I wrote that it had become a ritual to criticise the telecom regulatory authority of India (TRAI) whenever it announced reserve price for auction. The industry started making war cry of ‘unreasonably high price’ of spectrum. I tried to justify why the spectrum reserve price announced by TRAI was not high.
It did not take more than a couple of months for the market to prove it. last week, Airtel and Videocon entered into a spectrum trading deal. Airtel would buy Videocon’s spectrum in six circles `4,428 crore.
When Airtel informed stock markets about its agreement with Videocon, its shares went up by 3.36 per cent to `352 in BSE. The notification said: “Bharti Airtel has entered into a definitive agreement with Videocon Telecommunications ltd (VTl) to acquire, at an aggregate consideration of Rs 4,428 crore, rights to use 2x5 MHz spectrum in 1800 MHz band for six circles.”
It is to be noted that the spectrum that Bharti Airtel is buying is for 16 years only. If it acquires fresh spectrum in the forthcoming auction, it would be for a 20-year period.
The spectrum acquisition would be about 65 per cent higher than the reserve price fixed by the TRAI, adjusted for the residual life of 16 years.
Where are the big five consultancy firms who were earlier telling us that how the high reserve price recommended by TRAI would lead the telecom service providers on the brink of disaster and how the consumers would sufferIJ Why they are silent now. Why no rating agency has downgraded Bharti AirtelIJ
It is clear. The market rates spectrum at much higher price. It has become habit of the industry to cry foul whatever be the reserve price set by the department of telecommunications (DoT).
It is clear that Bharti Airtel needs spectrum for offering 4G data services. Now, the revenue will come from data services. Average Revenue Per User (ARPU) from data services will be much higher than what the operators are currently getting from voice services. So the price at which Bharti Airtel is buying spectrum is justified.
Interestingly, Bharti Airtel was not the only suitor for Videocon spectrum. Earlier, it had negotiated a deal with Ideal cellular for two circles. Ideal cellular was offering it much higher price for the two circles than what Bharti Airtel is offering to it. Videocon wanted to exit from all the six circles. Hence, Bharti Airtel offer suited it much more.
The deal proves that the spectrum prices recommended by the TRAI are justified and there is no need to relook at it. Again I would repeat that the debate on spectrum prices should be based on facts and scientific analysis.
(The writer is a Senior Journalist)