Thursday, November 11, 2010

raja's claims challenged by docomo

It seems that the troubles for telecom minister A Raja are increasing by the day. The last of his defences for giving away precious 2G spectrum in 2008 at throwaway 2001 prices has come crashing with the release of Tata Docomo`s 3G tariffs on Tuesday. 

Telecom analysts say it is now clear that Raja was wrong all along and had used the excuse that the service would be expensive for the common man to cause a massive loss to the exchequer. 

Tata Docomo`s 3G pricing shows that in spite of paying auction-based prices for 3G spectrum, the company has priced 3G-based voice services lower than its existing 2G voice tariff. Docomo charges a paisesec for 2G voice and has announced 3G voice at 0.66 paisesecond. Even 3G data tariffs compare favourably with 2G. Docomo`s competitive pricing ensures that other 3G operators will be compelled to price lower when they launch. 

In terms of cost per MHz, the 2G spectrum given by Raja at Rs 1,658.57 crore for 6.2 MHz across 22 circles was priced at Rs 12 croreMHz in a first-come-first-served basis offer. For 3G, the same companies have paid Rs 16,750.58 crore for 5 MHz across 22 circles or roughly Rs 152 croreMHz for 3G spectrum. Essentially, companies have paid 12 times more for 3G spectrum and yet, one of them still priced voice minutes lower than 2G services. 

This is the second time that Raja`s claims have been challenged. The first time he had claimed that 2G spectrum was the same as PDS rice and 3G was the equivalent of basmati rice. Trai in its recommendations of May 2010 trashed that logic while arriving at a conclusion based on spectral efficiency that 2G and 3G prices should be the same. 

Trai`s final recommendations on the issue are being awaited for over six months now. Trai favoured a market mechanism to determine the entry fee charged for 2G spectrum in its 2007 recommendations. Raja ignored this advice and also directions from the PMO, the finance ministry and the law ministry, to leave 2G pricing to an EGoM.