 "Trai suggests huge cut in spectrum price")
While the regulator rejected incumbent operators’ demand to reserve at least 2.5 MHz spectrum in the 900-MHz band, it sharply lowered the base price for this band, too — by about 60 per cent — in Mumbai, Delhi and Kolkata, the three cities where licences are coming for renewal.
Under the earlier formula, the base price for 900-MHz spectrum had been fixed at twice the 1,800-MHz rate. But the new rate would be 20 per cent lower than that and 70 per cent less than the 3G auction price, despite the fact that this band is considered three times more efficient than the 2,100-MHz band.
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The Trai recommendations have come after the empowered group of ministers (EGoM) on telecom decided that the regulator’ views should be sought on the reserve price of spectrum to be auctioned in the 1,800-MHz, 900-MHz and 800-MHz bands.
The move is also expected to attract the telcos that had kept away from the earlier spectrum auctions in key circles like Mumbai, Delhi and Karnataka, citing high base price. The regulator has cut the reserve price by 54 per cent to Rs 175.12 crore in Delhi, by 56 per cent to Rs 165 crore in Mumbai and by 32 per cent to Rs 124 crore in Karnataka.
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Trai has also recommended that trading of spectrum be allowed, provided it has been obtained through auction or market value has been paid for it.
Cellular Operators Association of India (COAI) Director-General Rajan Mathew says: “Surely, it has reduced the base price substantially. But based on our market price study, we think the reserve price should have been around Rs 5,000 crore for 5 MHz of pan-Indian spectrum. However, by pegging it at Rs 7,500 crore, they have made the base price almost equivalent to what we think should be the market price.” Mathew also says incumbent players are disappointed that some spectrum in the 900-MHz band has not been reserved. That is not right.
There also are some serious concerns, especially from the CDMA players. “By not recommending anything on the base price for the 800-MHz band, the regulator has ensured that companies using this technology have no spectrum or growth path for the future.” says a top executive of a company that offers CDMA services.
Some telcos say the move will only benefit some of large incumbent players. For instance, they will now get 900-MHz spectrum at a price lower than 3G, and much lower than that earlier stipulated. “The 900-MHz spectrum is valuable. It can be used for 3G services. And it has now been given on a platter to incumbent players,” says the CEO of a new telco.
They also argue that it will be a bonanza for incumbent players with large presence, as the base price for spectrum in Delhi and Mumbai, for instance, is much less than what new operators in the earlier auction paid for circles like Tamil Nadu and Maharashtra . In Delhi and Mumbai, the reserve prices for the 1,800-MHz band are at a 35 per cent discount on the price discovered in the previous auction, for even the Tamil Nadu circle. Matthew acknowledges this could be a contentious issue: “The government has to take a call on whether they will refund the money if the final price of spectrum is lower than that paid in the same circle.”
Arvind Bali, CEO of Videocon Telecommunications, which bought spectrum in the earlier auction, says: “We feel the recommendations recognise and reconfirm the fact that the reserve price fixed for the November 2012 auction was wrong and those who bid for spectrum in that auction paid prices that were exorbitantly high.”
Neeraj Jain, senior director, Deloitte in India, says: “At an overall level, Trai is thinking and pointing in the right direction. But the recommendations could have been tighter. While DoT is asked to provide a clear road map for spectrum quantum and timeline for various auctions in future, Trai has not specified a time horizon.”
The government’s failure to attract takers for spectrum in the earlier auctions had prompted Planning Commission Deputy Chairman Montek Singh Ahluwalia to request the government to ask Trai’s views on the issue.
The government has to conduct another round of auction to comply with the Supreme Court’s order dated February 15---the court had asked it to auction the entire spectrum available after licence cancellation. The EGoM, headed by Finance Minister P Chidambaram, of course has to take a final decision on the recommendations.
In November 2012, the government earned Rs 9,407.64 crore by auctioning 1,800-MHz spectrum. Though it had auctioned 176 blocks (1.25 MHz each) of the 198 blocks, it recorded bidders for just 101 blocks. Due to the high reserve price, Mumbai, Delhi, Karnataka, and Rajasthan did not record any bidder. For the auction in March, the government reduced the base price for these circles 30%. It had also cut the base price of the 800-MHz spectrum 50%, after it failed to attract bidders during the auction in November.
In March, only Sistema Shyam Teleservices bid for spectrum in the 800-MHz band, for select circles.