Digital Communications Commission shrugs off clamour for lower prices, says hopeful of concluding auction by April
Lobby group COAI cautioned that operators would find it tough to raise funds for the auction
New Delhi: The Digital Communications Commission (DCC), the highest decision-making authority at the department of telecommunications (DoT), on Friday accepted the prices suggested by the Telecom Regulatory Authority of India, or Trai, for spectrum auctions in March-April, when the government will put on offer airwaves for 4G and 5G services.
The DoT plans to put 8,300 megahertz of spectrum at a reserve price of ₹5.23 trillion under the hammer, telecom secretary Anshu Prakash said on Friday.
“The DCC has not reduced the prices from what was recommended by Trai...we expect good participation because the telecom operators do require spectrum, their services are expanding, their networks are expanding...there should be good competition in bidding. The Trai has given detailed reasons. So the DCC thought it fit to accept that," Prakash told reporters after the DCC meeting.
“We are hopeful that the auction should be conducted in March-April," he added.
The development could be a setback for telecom operators, who have been clamouring for far lower spectrum prices.
The Cellular Operators Association of India (COAI) has cautioned that with spectrum reserve prices 4-6 times those of similar spectrum sold recently in several other countries, high levels of debt, and financial stress in the sector, telecom service providers will find it very difficult to raise funds to participate in the auctions.
“It will be prudent to let the sector regain some financial strength from the recent initiatives undertaken before scheduling the auction for 5G. The interim period can be used to design and test India-specific 5G use cases," Rajan Mathews, director general, COAI, said.
Email queries to Reliance Jio, Bharti Airtel and Vodafone Idea were unanswered till press time.
The panel has stuck to the prices suggested by the regulator despite telecom minister Ravi Shankar Prasad promising the industry of “reform in spectrum pricing".
To be sure, the government did not auction any spectrum in FY18 and FY19.
In FY17, the Centre had raised ₹65,789 crore through spectrum sale, a fraction of the ₹5.63 trillion worth of spectrum, at base price, it had put up for sale. While the total spectrum put up for sale was 2,354.44MHz across seven bands, the government managed to sell just 965MHz.
Out of the 8,300MHz of airwaves that the government plans to offer, 6,050MHz are allocated for 5G services. The next generation of wireless technology is set to catapult data speeds and propel the Internet of Things, with the potential to bring radical changes in agriculture, manufacturing, healthcare and education.
The DCC’s decision will need the approval of the Union cabinet. The bids for the request for proposal to appoint an auctioneer will be opened on 13 January.
India’s telecom sector has witnessed disruption after the entry of Jio, a subsidiary of Reliance Industries Ltd, in September 2016, bringing down data prices to rock bottom. Following this half-a-dozen companies either shut shop or were acquired by bigger players. The domestic telecom market is now largely a three-way play between Bharti Airtel, Vodafone Idea and Jio.
In August 2018, Trai had suggested that ₹492 crore should be the base price for per megahertz of 3,300-3,600 MHz band, expected to be the primary band for 5G services. In South Korea, the same band was priced at around ₹131 crore per megahertz in auctions held in June 2018. Bharti Airtel had said that 5G spectrum prices were exorbitant, while Jio had urged the Centre to take a “holistic look at promoting 5G technology with policy measures including optimal pricing of 5G spectrum".
The base price of 700MHz band has been fixed at ₹6,568 crore per megahertz—43% below the ₹11,485 crore set in the 2016-17 auction. The high-value 700MHz spectrum is considered efficient for deploying 4G LTE networks and has greater structural penetration. For airwaves in the 800MHz and 900MHz band, prices have been lowered by 21% and 51%, respectively.
As per the policy, bidders have to pay 25-50% upfront, and the rest in 16 annual instalments after a two-year moratorium. Upfront payment is 25% for sub-1GHz band and 50% for spectrum of higher frequency bands, which are available with DoT and do not have to be vacated by other agencies.
However, the DoT has tweaked the amount to be paid upfront in case spectrum has to be vacated by existing users.
If the sub-1 GHz spectrum is not immediately available with DoT and the operator has bid for it, the operator will have to pay only 10% out of the 25% upfront payment. The balance can be paid a month before the spectrum is made available. For higher bands, bidder will have to pay 20% of the 50% upfront payment and the balance a month prior to when the spectrum is vacated by existing users.
“The government should focus on the rollout of services as much as the funds raised by sale of spectrum. Not reducing reserve prices is insensitive. After all, base price is only the starting bid, not the final price. This system is unwise since it protects government revenue at the cost of service rollout," said Mahesh Uppal, director of communications consultancy ComFirst India.