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Business News/ Industry / Telecom/  Third round of 2G spectrum auction by January
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Third round of 2G spectrum auction by January

Govt expects to earn `
11,000 cr from sale; panel still studying Trai recommendations on valuations

The telecom regulator earlier this month recommended a sharp cut in the auction reserve prices. Photo: Mint (Mint)Premium
The telecom regulator earlier this month recommended a sharp cut in the auction reserve prices. Photo: Mint
(Mint)

New Delhi: The Department of Telecommunications is planning a third round of auction for second generation (2G) spectrum by January and expects to get at least 11,000 crore from the sale, DoT secretary M.F. Farooqui said on Tuesday.

The new deadline comes even as an internal committee of DoT, headed by member (technology) Anil Kaushal, is still studying the Telecom Regulatory Authority of India’s (Trai) recommendations on valuation of spectrum, submitted earlier this month. The committee was given 10 days from its constitution to submit its report.

“The report should come this month," Farooqui said on the sidelines of a press conference announcing the signing of a memorandum of understanding (M0U) between state-run telecom service providers Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) for greater cooperation and infrastructure sharing.

The estimated earnings from the coming auction is about one-fourth of the 40,000 crore that was expected from the earlier two rounds. The earlier auctions, held in November 2012 and March 2013, are considered failures as they collectively resulted in a sale of less than one-third of the available spectrum, earning the government far less than its expected amount.

The Union budget for 2013-14 had estimated a receipt of 40,000 crore from the sale of spectrum.

“I think this reflects the reality of the telecom sector’s ability to pay for the spectrum, considering the current financial status of the industry," said Hemant Joshi, partner, Deloitte Haskins and Sells, a consulting firm.

Trai, in its 9 September recommendations, suggests that the earlier reserve price for spectrum in the 1,800MHz and 900MHz bands—commonly referred to as the 2G bands—be cut by more than half.

Trai recommended a pan-India reserve price of 1,496 crore per MHz in the 1,800MHz band, while for 900MHz, it suggested 288 crore per MHz for Delhi, 262 crore for Mumbai and 100 crore for Kolkata. The regulator also recommended allowing spectrum trading, not allowing reservation of any spectrum, and a uniform spectrum usage charge for operators.

The Kaushal committee will submit its report to the Telecom Commission, the highest telecom policy decision making body, for final vetting. It is likely that some of the decisions may be referred to the empowered group of ministers on spectrum, chaired by finance minister P. Chidambaram, for a final call.

The DoT is also working on getting together additional spectrum from the defence forces in the 2.1GHz band, needed for offering third generation (3G) technology-based mobile services.

As per internal DoT memos and presentations, reviewed by Mint, there is a requirement for another 3-4 slots of 5MHz of 3G spectrum in the country. This is based on the fact that the current 3G spectrum is expected to reach saturation levels by 2015—just five years after the spectrum was auctioned, a DoT official said.

Earlier this month, DoT had proposed a swap-of-sorts where the defence forces would vacate 15MHz of 3G spectrum in exchange for the same amount of spectrum in another frequency band.

Currently, there are no operators with 3G spectrum across the country, though the BSNL-MTNL combine were allocated spectrum across the country as part of the auction.

The lack of a pan-India footprint forced private telcos Bharti Airtel Ltd, Idea Cellular Ltd and Vodafone India Ltd to exploit a loophole in the telecom policy called intra-circle roaming. This allowed the telcos to use each other’s networks and spectrum till they were able to get their own. The tri-partite deal has since been labelled illegal by DoT and the telcos are fighting the case in the courts.

If the defence forces free up the spectrum, the private operators may be able to acquire blocks and offer pan-India services, a second DoT official said. According to a DoT presentation reviewed by Mint, the 15MHz with the defence forces is currently lying vacant.

But, even if the spectrum is freed by the defence forces, it is unlikely the auction will take place in the current fiscal.

“Considering the market dynamics and low offtake of 3G in the country, the existing 3G spectrum is not yet fully utilized. Therefore this auction may be deferred," said Joshi of Deloitte Haskins.

As for MTNL and BSNL signing the MoU, many industry experts speculate the two state-run telcos may merge—something that the government has been trying to work out for at least five years.

The two telcos will share assets such as buildings, mobile masts and international long-distance phone networks, the companies said in a joint statement. This could enhance their ability to get enterprise customers that are increasingly making up a large part of the revenue of private telcos.

The move is likely to help the floundering state-run telcos compete better with private firms, especially after the group of ministers looking into their revival approved the refund of money paid for broadband wireless access spectrum (BWA) on 12 September.

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Published: 24 Sep 2013, 12:06 PM IST
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