Telecom stocks slammed on TRAI suggestions

Telecom shares were pounded after the telecom regulator TRAI suggested that telecom operators must pay a one-time fee for holding radio-spectrum beyond 6.2 mega hertz based on 3G prices. TRAI chairman J.S. Sarma was quoted as saying that the plan to charge a one-time fee for holding 2G radio spectrum in excess of 6.2 MHz would mean mobile phone companies must pay Rs300-350bn more to the Government. The worst affected companies will be Bharti Airtel, BSNL, Idea Cellular and Vodafone Essar, which hold 2G spectrum beyond 6.2 megahertz (MHz). Investors are concerned as TRAI's recommendations will have negative impact on the industry. After soaring 3G auction rates, which is to be followed by broadband auctions, telecom companies may now have to pay extra for 2G. This coupled with uncertainties in the sector and one paise per second tariffs could continue to weigh on telecom stocks.

However, Telecom Minister A. Raja said that the Government will listen to mobile phone operators' concerns before finalising plans to slap new fees on second-generation spectrum. India's leading mobile phone operator Bharti Airtel said that the regulator's proposals were "shocking, arbitrary and retrograde" and urged Government to reject them. Others like Idea and Vodafone Essar also slammed the TRAI recommendations and asked the Government to step in. "If necessary, patient hearing will be given to all stakeholders," Raja said. He also said that he expected the ongoing 3G spectrum auctions to conclude in the next few days. Bids for one set of nationwide third-generation (3G) mobile spectrum licences in India reached Rs150bn (US$3.33bn) as of May 13, an indication that the Government could earn revenue of more than Rs600bn from the sale.