The Telecom Regulatory Authority of India (TRAI) in response to a letter written by four chief executive officers (CEOs) expressing their concerns regarding high 2G reserve price has the Department of Telecom (DoT) that the proposed reserve price for 2G spectrum auction will not have any adverse impact on the profitability of the telecom industry.
The CEOs had written to the government on May 2, 2012 claiming that the TRAI proposals would hurt operators? revenues.
In response TRAI has observed that the earnings before interest, taxes, depreciation, and amortization and return on capital employed for telecom companies has been healthy and shows positive trends over the next 20 years. Also, the internal rate of return for the telecom players is robust. Thus, it?s recommendations regarding 2G reserve price would not have any adverse affect on telecom companies? profitability.
TRAI had earlier proposed a reserve price of Rs 180 billion for 5 MHz spectrum. It maintains that the recommended price ensures that the full value of the spectrum is realised to the government. It has said that keeping the spectrum price indexed to 2001 price or to the 3G reserve price would tantamount to giving nation?s resource at a low price to the operators.
