2G spectrum value in 2008 would have been between Rs.5,500 crore and Rs.9,500 crore for pan-India licence

Throwing its own figures into the debate on how much the spectrum scam might have cost the exchequer, the Telecom Regulatory Authority of India (TRAI) has said the value of 2G spectrum in 2008 would have been between Rs.5,500 crore and Rs. 9,500 crore for a pan-India licence as against Rs.1,658 crore an operator like Unitech paid for getting its licence on a first come, first served basis.

Contrary to reports in some sections of the media, the TRAI report nowhere mentions that the loss to the exchequer due to spectrum allocation in 2008 was “zero.” Prepared by a three-member committee, the report was submitted to the Supreme Court by the Central Bureau of Investigation on Tuesday as part of the charge sheet. The former Telecom Minister, A. Raja, allegedly flouted norms in allocating licences to some private firms.

Various methodologies

The committee, which used various methodologies to find the value of spectrum that obtained between 2001 and 2008, began with determining the value in 2001 when the entry fee for a pan-India licence comprising 22 telecom circles was decided at Rs.1,658.57 crore. By subtracting the amount paid by the basic service operator as entry fee in corresponding circles, the panel found that the value of spectrum in 2001 was Rs.1,202.91 crore.

Interestingly, quoting the TRAI recommendations of May 2010 on “Spectrum management and licensing framework,” the report said the revenue generation capacity per MHz of spectrum was roughly five times more in 2010 than in 2001. It, therefore, found that the value of spectrum in 2010 based on the 2001 auction price of Rs.1,658 crore would be Rs.8,278.41 crore, while the price based on disaggregating spectrum value and licence value (Rs.1,202 crore) would be Rs.6,002.52 crore.

However, the report further modified (refined) the revenue per MHz index by service areas (telecom circles) to show that the value of spectrum had increased a little less than three times during 2001-2008. As a result, it estimated that the valuation of spectrum would be Rs. 4,141 crore.

Similarly, based on a “production function model” (used to estimate the statistical relationship between inputs and outputs), the value of spectrum in 2008 was pegged at Rs.9,568.39 crore, while the “adaptive expectation model” (based on expectations of market prospects) put it at Rs. 5,444,65 crore. The report, however, does not mention the total value of spectrum that was given away in 2008 when 122 new licences and 35 dual licences were allotted.

The report cautions that “retrospectively estimating the annual value of spectrum…between 2001 and 2008 is a tricky exercise.” Pointing out that it was not possible to predict with certainty the precise value of 2G spectrum that would have emerged in an auction in 2008, the report said: “The risk of error in the estimates increases since the exercise is carried out retrospectively and with meagre data.”

In its report, the Comptroller and Auditor-General put the “presumptive loss” due to 2G spectrum allocation in 2008 at between Rs. 57,000 crore and Rs. 1.76 lakh crore based on various assumptions.

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