The already dwindling growth rate of incumbents including Airtel, Vodafone and Idea is set to become more severe with the regulator’s new recommendations on 2G spectrum allocation and pricing.

Incumbents hold spectrum beyond 6.2 MHz in significant circles. They will now have to match prices equal to the successful bid price for 3G spectrum auctions. This could be financially pinching for operators as 3G price in some of the metro circles and category ‘A’ circles are very premium priced.

TRAI’s recommendations state that operators who hold additional spectrum will now have to match 3G spectrum price for spectrum held beyond 6.2 MHz and within 8 MHz. For spectrum held beyond 8 MHz, service providers will have to pay 1.3 times the price of 3G spectrum.

Bharti and Vodafone particularly hold additional spectrum beyond 10 MHz in many circles.

At the current trends, Bharti, Vodafone and Idea will collectively have to shell out Rs.10,000 crore towards payment for additional spectrum.

Additionally TRAI has also propsed to do away with the lock-in period presently imposed on new operators. It has proposed that market share of the merged entity should not be more than 30% of the total subscriber base. This means incumbent Bharti Airtel can not acquire any new entrant since its market share is already more than 30%.

Moreover post merger, the entity will have to pay a spectrum transfer price which will be 5% of the difference between the transaction price and the total current price.