At TRAI’s reserve prices, there would be no demand for spectrum, which make this study an academic exercise. Nevertheless, the number work provides some basis for the Empowered Group of Ministers (EGoM) to decide lower reserve prices, which it has been unwilling to do until now fearing scam charges. Although TRAI continues to defend its reserve price stating that the entire impact need not be passed on to the subscriber, DoT/EGoM may choose to ignore this.
TRAI’s calculation of how much the government will make ignores banking system constraints, the current extent of leverage in the industry, and the possibility that there may be no demand for spectrum at this price. We think operators would not be interested in anything more than 50% of TRAI’s current Rs36bn/MHz reserve price.
DoT and TRAI are not discussing spectrum trading. If this is allowed, it would enable telcos to sell spectrum and create some liquidity. Thus, collateral held by banks would not be completely illiquid, which would increase the willingness of banks to lend.