New Delhi: Divisions have surfaced among India’s telecom service providers, especially between the old and new operators, over the auction of spectrum that will follow a Supreme Court order scrapping 122 licences allocated in 2008.
Incumbent operators, including Bharti Airtel Ltd, Vodafone India Ltd and Idea Cellular Ltd, have suggested that all operators and interested parties be allowed to bid for the second-generation (2G) spectrum and licenses. They made the suggestion to the Telecom Regulatory Authority of India (Trai) as part of a consultation process preceding the auction. The suggestions were posted on the Trai website.
The three have also suggested that the auction be for all the available spectrum in the 1MHz slots and the validity of the spectrum be for 20 years. Idea, however, deviated slightly, suggesting that the incumbents be allowed to bid for spectrum in 1MHz slots but new operators bid for 4.4MHz first. The operators should be allowed to get as much spectrum as the subscriber-linked criteria allows them, Idea said.
On 2 February, the Supreme Court cancelled 122 licences and spectrum allocated to nine companies and asked Trai to come up with auction guidelines for the licences and spectrum.
The next day Trai sought stakeholder comments on the auction, setting 15 February as the last date for the consultation process.
A number of stakeholders have suggested that the reserve price for the airwaves be the price determined from the the last auction of 2G spectrum—Rs 1,658 crore for 6.2MHz or Rs 267crore per MHz—as the airwaves have been allocated as late as 2007 at the 2001 price and therefore it would be against the level playing field principle, if the price is set higher.
On the spectrum cap, Vodafone suggested that bidders be allowed to buy as much as 25% of total spectrum in a circle. Vodafone, however, did not seek a lower reserve price and suggested that “the reserve prices should be set only to deter frivolous bidders. The reserve prices applied in the 3G/BWA auctions were high, but not unreasonable”.
A number of stakeholders, including Etisalat, suggested that the cap on the total amount of spectrum an operator can hold should be restricted to 8MHz in areas other than Delhi and Mumbai while it should be 10MHz in these cities.
Norway-based Telenor, the worst-affected by the cancellation of the licences, suggested that the regulator follow the example of the UK. Specific suggestions included reservation of a slot of start-up spectrum for new operators and a clear roadmap for other spectrum auctions in the 700MHz and 2100 MHz bands needed for high-speed wireless broadband services.
“‘Trai should also put up the 4G spectrum (700MHz and 2100MHz) up for auction at the same time as this would disincentivise the larger incumbent operators from using the 2G spectrum auction as an opportunity to decrease the threat of increased competition from the new operators,” Telenor said in its suggestions. Similarly, the auctions should not be for small bits of spectrum and should be for at least 6.2MHz as this would ensure that the new operators, at least, have enough to start with, Telenor said.
“The purpose of the 2008 allocations was to introduce increased competition in the market and the coming auction should be held with that in mind,” Telenor said.
State Bank of India (SBI) has also suggested that the spectrum be auctioned in blocks of 6.2MHz. SBI, however, deviates from the operators’ suggestions on the reserve price. “The reserve price should be such that it enables a successful bidder to have an economically viable and bankable business plan within a reasonable period of time. The experience in this regard has been that even at a level of Rs 1,650 crore entry fee paid by new operators, the operators have not been able to break even. The experience of 3G auction at Rs 16,750 crore for a pan-India spectrum has also not been encouraging so far,” SBI said.
Tata Teleservices and the Association of Unified Service Providers of India (Auspi), the lobby group for CDMA technology-based service providers, suggested that a different auction model from 3G auction be used.
Videocon suggested a three-phased auction with the first phase being open only to new entrants including the operators whose licences have been cancelled and others who want to enter. The second phase should be for operators which have start up 4.4MHz spectrum and want to increase it to 6.2MHz and the third phase should be for operators with spectrum of more than 6.2MHz up to the maximum allowed by Trai in blocks of 1MHz. This will ensure adequate competition in market and low tariffs.