Auctioning of spectrum in the valuable 700 MHz band to new telecom players who have not been allocated any radio waves, as proposed by the Trai, could cause loss to government exchequer, experts have said.
"Restricting the initial auction of 700 Mhz to few may not enable the government realise true market value of the valuable spectrum," Ashish Basil, Partner (telecom practice) at Ernst and Young, told PTI.
Basil said that opening of 700 Mhz spectrum, however, will introduce new players and would benefit consumers.
The Telecom Regulatory Authority of India (Trai) in its recent communication to the Telecom Department had said that it was separately initiating a consultation process on issues related to spectrum refarming, where it would consider limiting auction of 700 MHz spectrum band initially to those not holding spectrum in the 800 MHz and 900 MHz bands.
The 700 Mhz frequency band is considered to be one of the most valuable slots for telecom services as most of the latest technology can be transmitted in this band.
Also, investment required to roll out infrastructure will be lower for telecom companies in 700 Mhz compared to telecom operators providing services using higher frequency.
In 2010, the government made around Rs 68,000 crore from auction of 3G spectrum in 2100 Mhz spectrum band, but proposed model of Trai may generate lower revenue for a band which is considered more valuable then 3G spectrum band, Executive Director at PricewaterhouseCoopers India Mohammad Chowdhury said.
"This round is not likely to drive as much value for government, as the 3G licensing in 2010 since operators will be bidding on the economics of the spectrum as opposed to also for participation rights in the market (for 3G) as they did before," Chowdhury said.
Basil sees this move may benefit telecom industry and consumers but will be a pain for incumbent players.
"The network costs for the incumbents in 800/900 Mhz may go up as they move into relatively less efficient 1,800/1,900 Mhz bands post refarming," Basil said.
He said that proposal may lead to players in 800 and 900 Mhz pay additional cost for the 700 Mhz spectrum band.
CDMA services are provided through 800 Mhz spectrum band while GSM services in the country are carried through 900 and 1,800-Mhz spectrum band.
