BackMinistry proposes spectrum swap with army to free airwaves for auction
Finance ministry asks DoT to evaluate proposal to make available enough 3G spectrum
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New Delhi: India’s finance ministry has asked the department of telecommunications (DoT) to evaluate a proposal to swap spectrum with the armed forces to make available enough 3G (or third generation) spectrum for an auction to raise as much as $12 billion that will be conducted along with the 2G spectrum auction in January.
According to an internal memo of DoT, the joint secretary (infrastructure), department of economic affairs (DEA) has suggested that DoT look into swapping spectrum in the 1900MHz band, kept in reserve for refarming of 800MHz band spectrum, with spectrum in the 2.1GHz band, held by the defence forces and needed for data-rich 3G services. “The proposal will open up an additional 20MHz of 2.1GHz spectrum for auctions," the note, reviewed by Mint, said. This 20MHz or four slots of 5MHz includes one slot already available with the DoT in most circles.
The proposal is along the lines of one suggested by Cellular Operators association of India (COAI), a lobby group of telcos such as Bharti Airtel Ltd and Vodafone India Ltd, that were early entrants, and operate on the GSM technology platform. In August, the telecom department had approached the armed forces with this proposal. The proposal talks of giving the defence forces spectrum in the 1900Mhz band. Currently, 800Mhz spectrum is held by telcos that operate on the CDMA technology platform. Spectrum in the 1900Mhz band is being kept in reserve for auction to these CDMA operators.
According to an e-mail sent by the finance ministry to DoT, the January auction for spectrum in the 900Mhz band (in Delhi, Mumbai and Kolkata, currently held by the older GSM telcos, that will need to be surrendered and then bid for, under the government’s refarming plan) is expected to fetch a minimum of ₹ 9,500 crore. Similarly, the spectrum in the 1800MHz band (across the country), going on sale in January, is expected to net the exchequer around ₹ 15,000 crore, at the reserve price recommended by Trai. This makes a total of around ₹ 25,000 crore ($4 billion).
If four slots of 3G spectrum are also auctioned, even at half the price discovered in the 2010 auction, it would net the government around $8 billion, double what is expected from the 2G auctions in the 900MHz and 1800MHz bands. Interestingly, the email from the DEA joint secretary to the DoT is titled, “Spectrum swapping proposal—Can solve India’s CAD problem". CAD stands for current account deficit. The finance ministry has thrown its weight behind the telecom department’s move to ask the armed forces to vacate 15 MHz or units of 3G airwaves, in exchange of another set of frequencies in another band.
The 2G auction is expected to start on 7 January. The new norms for the auctions are currently being finalized by the government. The Telecom Commission (TC), in its meeting on 3 October accepted most of the recommendations made by the Telecom Regulatory Authority of India (Trai) in its 9 September recommendations on the valuation and auction of 2G spectrum. The TC did however ask for clarification from the regulator on the justification for reducing the reserve price for the 2G to be auctioned by almost 60%.
India’s CAD widened to 4.9% of GDP in the first quarter of the current fiscal from 4% of GDP in the year-ago period.
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