TRAI to issue spectrum proposal as investigation clears Reliance Communications

The chairman of TRAI (Telecom Regulatory Authority of India) has announced that the regulator is soon to publish proposed guidelines for the pricing of 2G mobile spectrum.

In May last year, the regulator suggested that operators that held over 6.2MHz of 2G spectrum should be charged an upfront payment, the value of which would depend on eventual 3G auction prices.

Chairman JS Sarma has stated that it has not yet been decided whether this model will form the basis of the new system, or indeed if 2G and 3G pricing models will be linked in any way. Many major operators disapproved of TRAI’s previous recommendation due to the resulting high fees.

India’s 2G licences have been in the spotlight recently, as the country’s 2008 2G licensing process has come under intense scrutiny following the revelation that licences were sold for a fraction of their actual value.

One company that was eager to distance itself from the scandal was Reliance Communications, under investigation due to claims that the company owned over 10% of 2G licensee Swan Telecom (now Etisalat DB).

Reliance has been cleared by the Ministry of Corporate Affairs, which has confirmed that the firm at no point owned above 9.9% of the company – a crucial difference under Indian law, which limits the amount of shares that businesses may hold in rival firms.

If Reliance had owned over 10% of Swan during the auctions, it would have been in violation of this law since it already had existing operations. Swan gained its 2G licence in the January 2008 process, with Etisalat coming on board as a shareholder shortly thereafter, and it has since been alleged that Reliance was using Swan as a front. These allegations spurred Telecoms Minister Kapil Sibal to initiate the investigation into Swan’s ownership.

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