New Delhi: The telecom regulator has recommended an overall 10% increase in the base price for spectrum in the 1800 megahertz (MHz) band across the country, basing its valuation on the price discovered in the last auction of airwaves in February.
The Telecom Regulatory Authority of India (Trai) recommended on Wednesday that the minimum price for 1MHz of spectrum in the 1800MHz band be set at ₹ 2,138 crore. For spectrum in the more efficient 900MHz band, the regulator has set a base price of ₹ 3,004 crore per MHz in the 18 circles where the airwaves will be auctioned.
Trai has also reiterated that the government should allow telecom operators that offer services based on the more popular GSM technology standard to use the 800MHz band that is currently reserved for operators using the rival CDMA standard.
The government, which has so far raised ₹ 1.8 trillion through four spectrum auctions, expects to start the next auction in the 800MHz, 900MHz and 1800MHz bands from 3 February 2015. It is also working on including spectrum from the 2000MHz, 2300MHz and 2500MHz bands, and is likely to send the regulator a request to value these bands later this month, Mint reported on Tuesday.
Analysts estimate that if all the available spectrum in the six bands is sold, the government could raise as much as ₹ 2 trillion, depending on the financial health of the telecom sector at the time of the auction.
Similar to the previous auction for airwaves in metros, much of the 900MHz spectrum that will go on sale in February is currently being used by incumbent telcos and will become available as their right to use the frequencies expires next year.
Trai has, however, not deviated much from its previous recommendations as far as the auction process is concerned.
While bidding for both 900MHz and 1800MHz bands will continue to be in 200KHz blocks, operators will have to bid for a minimum of 3.6MHz in 900MHz band in circles where there is more than 10MHz available and 2.4MHz in circles with less than 10MHz in that band. For 1800MHz, bidders would have to bid for a minimum of 0.6MHz.
Because of partial availability of 1800MHz spectrum in Maharashtra, West Bengal and Rajasthan, Trai has suggested there be no auction for the first two states and a 30% discount on the reserve price for the third because of the partial availability.
The new recommendations have stressed on making more spectrum available for commercial use as well as making it as efficient as possible.
“The Authority recommends that a dialogue needs to be held at the level of the Finance Minister, the Minister of Communications and IT and the Defence Minister to ensure the availability of additional spectrum for commercial use. The Authority is also of the view that the auction should be carried out only after a clear roadmap is available for vacating spectrum in 2100 MHz band from Defence and in 900 MHz band from BSNL," the telecom regulator said in its recommendations.
Trai further recommended that the Armed Forces should vacate unused spectrum that they are holding. If that is not possible, the government should reserve 20MHz in the 1800MHz band for the Armed Forces in circles where they already hold spectrum and 5MHz in the same band in circles where they don’t. The rest should be auctioned as soon as possible, it said. The Armed Forces have been asked to vacate the 2100MHz band, needed for 3G-based telecom services. Currently, the telecom department and the defence ministry have failed to reach an agreement.
The telecom regulator has recommended that 1.2MHz spectrum in the 900MHz band should be taken back from Bharat Sanchar Nigam Ltd (BSNL) from all the circles where permits expire in 2015-16 except in Punjab. In lieu, BSNL should be assigned 1.2MHz in the 1800MHz band in circles where its spectrum holding in that band is less than 3.8MHz such as in Gujarat, Rajasthan and West Bengal, Trai said.
BSNL has 6.2MHz in the 900MHz band in all 18 circles where licences are due to expire in 2015-16.
Other recommendations of the regulator include allowing telcos to barter spectrum among themselves to make it contiguous and more efficient.
Analysts welcomed the move to make more spectrum available, but expressed apprehensions over the increase in reserve prices for almost half the circles going on sale.
“The need for the defence to vacate the spectrum gets more and more everyday as usage goes up in the country. If they don’t vacate the spectrum before the auction, artificial scarcity gets created leading to soaring prices for the spectrum," said Hemant Joshi, partner at Deloitte Haskins and Sells Llp.
“That is not good for the industry that will have to leverage itself to continue doing business, or the government that will find it difficult to deploy its Digital India plans without spectrum," he said.
Joshi added that it was very important that the government come out with spectrum trading rules before the auction, allowing companies to sell spectrum they have not been able to deploy.