Fresh 2G Spectrum to cost More to Network Operators

The Telecom Regulatory Authority of India (TRAI) on Monday recommended to the government a much higher base price for the 2G spectrum auction that will be open to all players.

TRAI recommended the reserve price for the 1800 MHz spectrum at Rs.3,622 crore and that for 900 MHz at Rs.7,244 crore. For 700 MHz, it set the price at Rs.14,000 crore. This translates into a reserve price of over Rs.18,100 crore for a block of 5 Mhz in 1800 Mhz band and also the minimum pan-India spectrum price at Rs.3,622.18 crore.

It said the auction method will be the simultaneous multiple round auction (SMRA) format used during the 3G auctions in 2010.

Communications Minister Kapil Sibal meanwhile said the empowered group of ministers (EGoM) will meet to decide on the auction.

The new reserve prices for spectrum varies from circle to circle, with Delhi and Mumbai having the highest reserve prices for the 1,800 Mhz band at Rs.717.26 crore and Rs.702.14 crore respectively.

Telecom operators and sector analysts said the recommendation if accepted would raise costs for the players and eventually make mobile telephony more expensive for the subscribers.

Uninor said some of these recommendations would create “severe negative impact” on the industry. “It is up to the political leadership of India now to ensure that the gains of the past few years of affordable phone calls for India’s people are not undone.”

“It will hamper the ability to connect the unconnected and goes against the objectives of National Telecom Policy of ensuring improved rural tele-density and right to broadband,” said Vodafone.

The Cellular Operators Association of India (COAI) and the Association of Unified Telecom Service Providers of India (AUSPI) in a joint statement expressed shock at the recommendations and termed them as being arbitrary, regressive and inconsistent.

The regulator said though the auction would be open to all the players, including the incumbents and the new players, those firms which are holding spectrum beyond the prescribed cap should not be allowed.

A majority of operators in their responses to the consultation paper issued earlier during the year by the regulator had suggested the reserve price for 1800 MHz to be fixed for Rs.1,658 crore – the price charged for a pan-India 2G licence in 2008.

The regulator has been formulating a new spectrum policy in the wake of the Feb 2 Supreme Court order cancelling 122 telecom licences issued in 2008. The apex court had asked the affected firms to shut shop in four months. At the same time, the court had asked the government to re-distribute these licences to firms through an auction in the due time.

TRAI said that all spectrum to be assigned through the auction process in future shall be liberalised which means spectrum in any band can be used for deploying any services in any technology.

Since the application for renewal of licenses must be made at least 30 months in advance of the expiry of licenses, the regulator recommended that the 900MHz spectrum be auctioned at least 18 months in advance so as to enable the winning bidders to be ready with the deployment plans.

The auction of 900MHz spectrum may be carried out in the first half of the year 2013 while that of 700 MHz band may be carried out at a later date, preferably in 2014.

The spectrum which is to be vacated in 800 MHz band following the cabcellation of licences is 60 MHZ, while in 1800 MHz band it will be around 413 MHz.