30.1.15

Spectrum auction update

The Cabinet has fixed the starting price for 3G spectrum auctions at Rs.3,705 crore per MHz, which could net the government a minimum of Rs.17,555 crore. But operators warned that the high starting level could drive up voice and data tariffs.
Winners of the auction, which is slated to start on March 4, will have to make an upfront payment of 33% of the final bid amount to the government within 10 days of the close of the bandwidth sale. Rest can be paid after a moratorium of two years in 10 equal installments.
A 5 MHz block of 2100 MHz airwaves typically used for 3G services will be offered in all service areas except Jammu & Kashmir, Bihar, Himachal Pradesh, West Bengal and Punjab. Thus, a total of 85 MHz in 17 service areas is being put to auction, the government said. The Centre expects to generate .
Rs.5,793 crore from the 3G sale alone in this fiscal, as winners are expected to pay in installments, which can be used to bridge a part of the budget deficit.
However, the overall proceeds from auctions this fiscal will rise substantially, as including the 2G (800 MHz, 900 MHz and 1800 MHz) and 3G bands being put for sale, the Centre expects to generate a minimum of Rs.80,000 crore, a portion of which will come in by March-end.
The final price, which was 36% higher than the Rs.2,720 crore a unit recommended by the Telecom Regulatory Authority of India (Trai), left the industry disappointed.
Despite the prices, there is likely to be demand for the airwaves, which operators such as Bharti Airtel, Vodafone India and Idea Cellular need to support surging demand for their data services. No operator holds pan-India 3G spectrum, with Airtel, Reliance Communications and Aircel hold the most in 13 circles each. During the briefing, Prasad lashed out at the industry over claims that the government was creating artificial scarcity. The issue stemmed from the government’s decision to auction 5 MHz of the 3G spectrum, which the defence forces had agreed to vacate across 17 circles.
The telecom industry, backed by the telecom regulator, though was hoping that the government will auction 15 MHz more of 3G spectrum per circle across India, currently in possession of the defence forces but are being negotiated for by the telecom department.
The telecom regulator had recommended that the government should go ahead and auction these additional 15 MHz of airwaves, which the telecom department is yet to receive. Since there was an in-principle agreement between the defence and the telecom department to swap the latter’s 15 MHz of 3G airwaves in the 2100 MHz band with the former’s 15 MHz of airwaves in the 1900 MHz band, the regulator had said the actual allotments to the winners could have been made even a year later, as and when the actual swap occurred.
The cabinet ratified the price of 3G spectrum a day after the telecom department pushed the 2G and 3G spectrum auctions to March 4 from February 25.The government had previously fixed a reserve price of  Rs.3,646 crore pan-India per MHz of 800 MHz spectrum,Rs.3,980 crore per MHz of 900 MHz band (excluding Delhi, Mumbai, Kolkata, and J&K) and Rs.2,191 crore pan-India (excluding Maharashtra and West Bengal) per MHz of 1800 MHz frequency.

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