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The Union Cabinet on Wednesday approved a reserve price of Rs 3,705 crore per MHz for the auction of 2,100-MHz telecom spectrum from March 4, as recommended by the Telecom Commission. Auction of spectrum in the 800, 900, 1,800 and 2,100-MHz bands is expected to fetch the government Rs 90,000-100,000 crore.
The price approved by the Cabinet is about 35 per cent higher than what the Telecom Regulatory Authority of India (Trai) had recommended (Rs 2,720 crore for the 2,100-MHz band). Earlier, it had rejected the regulator’s suggestion of auctioning 20 MHz in this band and, instead, decided to offer a fourth of the amount in the coming auction. This has peeved telecom companies, which complain the move will lead to cut-throat competition and high spectrum prices.
Announcing the decision, Communications Minister Ravi Shankar Prasad said the auction would be “fair and transparent”.
“The reserve price is Rs 3,705 crore per MHz for 2,100-MHz spectrum. We have taken into account the market potential of this band…Spectrum trading and sharing norms are being finalised and will be notified soon. There is a campaign going around that there is spectrum deficit. But there is no deficit; whatever is available is being released,” he added.
With telecom operators to pay 25 per cent of the auction price for spectrum in the 800- and 900-MHz bands and 33 per cent for the 1,800- and 2,100-MHz bands, the government is set to get about Rs 25,000 crore. In the interim Union Budget for 2014-15, Finance Minister Arun Jaitley had estimated a mop-up of Rs 14,355 from the auction.
By postponing the auction of 15 MHz in the 2,100-MHz band, the government could get another Rs 17,500 crore in 2015-16. This is because it can earn about Rs 70,000 crore by selling the remaining 15 MHz next year, as the base price for that auction will be set at 80 per cent of the discovered price during the March auction, according to a Trai formula. Telecom operators allege the government hasn’t kept its word on key decisions, which could have an adverse bearing on the auctions, especially in planning for the next 20 years (the period of the new licence). They say the communications minister didn’t stick to his promise of announcing the rules of spectrum trading and sharing, as well as merger and acquisition rules, in December last year, well before the auctions, so that there could be clarity on the strategy.
Rajan Matthew, director-general of the Cellular Operators Association of India, said: “The government has created uncertainty among telecom companies by consciously holding back the announcement of crucial policies after the auction, only so that it maximises revenue. Now, telcos cannot plan on sharing or trading spectrum with other telcos to reduce their need for spectrum and cut costs.”
The auction is crucial for incumbent operators such as Bharti (six circles) Vodafone (seven), Idea (nine) and Reliance Communications (seven), whose licences are due for renewal this year; retaining their 900-MHz spectrum is crucial for their business. Bharti has already insured against failure in the coming auction by buying additional spectrum in the 1,800-MHz band in the auction in February 2014 for all the circles where its licences are set to expire.
Vodafone has to bid aggressively to retain spectrum in the 900-MHz band, as it hasn’t bought enough spectrum in the 1,800-MHz band.
Some operators say the government’s decision to restrict spectrum in the 2,100-MHz band to just one five-MHz block might backfire. “Frankly, operators whose licences are to expire will concentrate only in retaining 900-MHz spectrum. Why should they bid for just one 2,100-MHz block and over-bid when they know there three blocks are due next year and inter-circle roaming in 3G is still in the court? They might just wait and not participate in the 2,100-MHz auction at all, forcing the government to reduce prices, as had happened earlier,” said an operator.
EYEING MORE
- The combined proceeds from auction of all the four bands (800 MHz, 900 Mhz and 1,800 MHz and 2,100 Mhz) are estimated by the government at over Rs 1,00,000 crore — making it the biggest-ever spectrum sale
- The base price suggested by the Telecom Commission is around 35% higher than what telecom firms paid for in the 2010 auction
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BS REPORTER & PTI
