Trai vetoes 2G spectrum auction for now

Trai vetoes 2G spectrum auction for now

New Delhi: The Telecom Regulatory Authority of India (Trai) has recommended that 2G spectrum on which mobile phones work at present should not be auctioned just as yet.

Click here to read a blogpost on the confusion with 2G spectrum allocation

The regulator suggested that the licence be unlinked from spectrum and telcos apply separately for start-up GSM spectrum of 6.2Mhz.

The existing telecom firms with spectrum of more than 6.2Mhz would have to pay a one-time fee based on 3G prices for the remaining years that they have licences — a move that would hit existing operators such as Bharti Airtel Ltd. India currently grants additional radio airwaves to firms when they reach subscriber-addition milestones, only charging a usage fee.

This would mean that the per MHz price of spectrum discovered in the ongoing 3G auction would be divided by 20 (number of years that 3G auction is valid) into the remaining years of the telecom operators’ licence period. Most of India’s telcos have licences expiring from 2013.

Trai has also suggested linking 2G spectrum allocation to network rollout, not subscriber base.

On the issue of licence renewal, Trai has suggested that the renewal of a licence needs to be applied for 30 months prior to expiry. Renewal of a pan-India licence would cost Rs20 crore, equal to the entry fee.

“The central message of these spectrum management recommendations is that spectrum should not just be based one market price but also ensure that operators utilize the spectrum efficiency," J.S. Sarma, chairman of Trai said. “The excess spectrum in the market right now is valued at around Rs30,000 crore."

Trai has also suggested refarming spectrum in 900Mhz that gives some of the older operators a huge advantage due to its far lower capex requirement.

“The authority recommends that on renewal of the licence, spectrum held by a licence in the 900Mhz shall be replaced by assignment of equal amount of spectrum in 1800Mhz," a statement from Trai said. The spectrum would then be auctioned after refarming is completed

The regulator expects the requirement of spectrum to be around 500-800 Mhz while the availability is only 287-450Mhz and has therefore suggested that it carry out a review of the spectrum usage as well as carry out spectrum audits.

In the case of mergers and acquisitions, the resultant entity would be treated as one and would need to pay for spectrum above 6.2Mhz but no telco can have spectrum of more than 14.4Mhz.

Trai recommended ending restrictions on companies selling out, a move that will help paving the way for consolidation. Current rules do not allow companies to sell majority stakes in the first three years of getting a licence to offer telecoms services.

“We are clearly saying we should consolidate. We are not mandating consolidation but facilitating it," Sarma said.

Reuters contributed to this story.