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The Telecom Commission (TC) on Wednesday decided to take the middle path on spectrum pricing, recommending a rate 18 per cent higher than that suggested by the Telecom Regulatory Authority of India (Trai) but up to 25 per cent lower than that arrived at by an internal committee of the Department of Telecommunications (DoT).
Against the Trai-suggested base price of Rs 1,496.92 crore for one MHz of 1,800-MHz spectrum, TC recommended Rs 1,764.79 crore — 17.89 per cent lower — for the same amount of airwaves in the same band. Based on the two alternatives the DoT committee had given out, the reserve price came to Rs 2,378.52 crore and Rs 2,203.47 crore — higher by 47 per cent and 37 per cent, respectively, than Trai’s recommendations.
The internal committee’s first alternative was computing reserve price for one MHz of pan-Indian 1,800-MHz spectrum on the basis of market-determined price in the previous auction and the reserve price in the four circles where there were no bidders. The second was basing the prices on extrapolation of 2001 market price for the four circles, apart from the market price for the other 18 circles. (A WIDE SPECTRUM)
Besides, the Telecom Commission also decided to go ahead with the auction of the 800-MHz spectrum, rejecting the Trai recommendation that an extended GSM band (EGSM) be created, and asked the regulator to come out with a new formula to determine base price for the band.
Wednesday’s development, however, left the industry divided. GSM operators said this would dampen their interest in the coming auction, made worse by the fact that the commission had also suggested a 25 per cent increase in the reserve price for 900-MHz spectrum in the Delhi, Mumbai and Kolkata circles. The price hike would hit incumbent players like Bharti and Vodafone the most.
On the other hand, CDMA and dual-technology players (those operating both GSM and CDMA networks) welcomed TC’s move to auction 800-MHz spectrum simultaneously with other bands. Trai had recommended that the remaining 800 MHz spectrum be auctioned as EGSM, which could be used for 4G LTE operations and might fetch three-four times higher price.
According to the TC suggestion, the 1,800-MHz spectrum reserve price in eight circles — the metros of Delhi, Mumbai, Kolkata and five key ‘A’ circles of Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu — will be 25 per cent higher than the Trai recommendation. The valuation of the spectrum sent by Trai has now become the base price in these circles. For the other 14 circles, the reserve price set by Trai, mostly in line with market prices paid by operators in the November 2012 auction, has been accepted.
TC’s decision would now be forwarded to an Empowered Group of Ministers (EGoM) headed by Finance Minister P Chidambaram which will take a final call.
On the contentious issue of a uniform three per cent spectrum usage charges (SUC), TC has gone with the DoT committee’s suggestion. “The matter related to SUC needs more consultation and refinement. This will be studied further in consultation with the finance ministry,” an official said.
The Cellular Operators Association of India (COAI), which represents GSM operators, said it was ‘disappointed’ with the new price. The companies to be affected include Bharti, Vodafone, Idea and Aircel. “The Telecom Commission has come with a ad-hoc way of determining the new price, rather than leaving it to the regulator. There is no basis of what TC has suggested. The increase will surely dampen the participation of our members in auction of both 1,800- and 900-MHz bands,” said COAI Director-General Rajan Mathew, who also lashed out at TC for reserving 800-MHz spectrum for CDMA players at a lower price, and not selling it at a huge premium as EGSM spectrum.
Ashok Sud, secretary-general of Auspi, the industry body for dual-technology and CDMA players, however, said the industry was elated. “We welcome the move to auction 800-MHz spectrum. But it was not necessary for TC to ask Trai to fix the reserve price. We hope that does not delay the auction in January and expect the price to be 65 per cent of that for 1,800-MHz band,” Sud said. Surely, the move would benefit companies like Sistema Shyam, Reliance Communications and Tata Teleservices.
Some telcos also fear the decision might spark a new controversy. Earlier, in an interview, Trai Chairman Rahul Khullar had made it clear that CDMA players were seeking a cut in price of 800-MHz spectrum so that they have to pay less as one-time fee for spectrum held in addition to their 2.5 MHz to be based on the auction price. He had also pointed out that it would be a mistake for the government to sell this spectrum at a fraction of its value. And, considering that there was only one player coming for the CDMA auction, while the Tatas had returned some spectrum, it was clear no one was interested in the auction. “There is no way that the regulator will fix a low price for 800-MHz band, which can be used for LTE services and is more efficient and valuable than 1,800-MHz. If the EGoM does so, that will lead to a major controversy — of selling spectrum cheap,” said a senior executive of a leading telecom company.
Concerns have also been raised by independent analysts. “In overturning the regulator’s recommendations, TC does not seem to be in sync with market realities. This is likely to impact the market sentiment and have an impact on participation in the upcoming auction,” said Deloitte India Partner Hemant Joshi.
