Two rounds of lukewarm response in spectrum auctions saw the government cutting the reserve price for airwaves used by telecom companies by 25-53%, paving the way for fresh sale starting January. The latest round of auction for spectrum to be used by GSM operators is expected to help the government mop up Rs. 30,000-40,000 crore for the cash strapped exchequer.
The foundation for the lower prices for auctions in the lucrative 900 MHz and the 1800 MHz bands was laid down by regulator Trai in September, when it recommended a reduction of up to 60% from the last round of auctions held in March 2013. Subsequently, the Telecom Commission, an inter-ministerial body, increased the base price by 18-25% over what was recommended by Trai. On Friday, the empowered group of ministers (EGoM) headed by finance minister P Chidambaram accepted the Telecom Commission’s recommendations, which the industry isn’t complaining about. For GSM, the new price for the pan-India 1800 MHz auction will be Rs 1,765 crore (per MHz). In 900 MHz, the per MHz price for Delhi will be Rs 360 crore, Mumbai Rs 328 crore and Kolkata Rs 125 crore. An operator will have to purchase a minimum of 5MHz.
“We will hold the auctions in January and the entire process is likely to fetch around Rs 30,000-40,000 crore,” telecom minister Kapil Sibal said. The EGoM, however, did not decide on rationalizing the spectrum usage charges (SUC) that are paid by operators on their revenues. Trai had recommended a 3% flat SUC against the graded charges of 3-8% now, which rises based on the spectrum holdings of a mobile service provider. “We hope to take a decision on this matter before the auctions are held,” Sibal said.
The softer prices this time will come in as a relief to top telcos such as Bharti Airtel, Vodafone and Idea, which will see their 900 MHz licences expire in key circles of Delhi, Mumbai and Kolkata from next year. Auctions in this band — which is considered to be most cost-effective — are expected to see stiff competition from incumbents as well as some of the new entrants.
While being generous on prices, the EGoM refused to entertain demand of the incumbents for having a reservation of the spectrum they vacate in the 900 MHz band. The ministerial body decided to stick to the recommendations of Trai and the Telecom Commission, which had asked for re-farming or a fresh sale.
Sibal also said that spectrum trading — which would allow operators to sell unused airwaves to another telco — has been given a go ahead. “We have approved it. The final guidelines will, however, be issued by Trai.” The EGoM, however, failed to discuss the much-awaited merger and acquisition policy. The move is widely awaited by the industry and experts say that it will lead to consolidation in the sector, which is highly debt-laden with many small operators struggling to stay afloat.
While GSM auctions look all set for a pulsating beginning, the EGoM could not do much on initiating airwave sale for CDMA operators. Trai has steadfastly refused to have a sale in the 800 MHz band used by CDMA players such as Sistema Shyam Teleservices. It has instead favoured carving out of an extended-GSM (eGSM) band from the frequency. Trai’s move has been shot down by the department of telecom (DoT) and the Telecom Commission which sought a pricing mechanism for CDMA sale. “The EGoM has requested Trai to give a pricing for 800 MHz,” Sibal said. However, it is now more or less certain that there will be no auction for CDMA players in January as Trai will go through a fresh consultation process on the matter before coming out with a new pricing.
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