Telecom regulator Trai today recommended spectrum pricing for seven bands, including the premium 700 Mhz frequency at record base price of Rs 11,485 crore per Mhz, for the next round of auction which could fetch the government a staggering Rs 5.36 lakh crore.
Of the Rs 5.36 lakh crore windfall, the premium 700 Mhz band spectrum could alone contribute over Rs 4 lakh crore if all frequencies are sold at pan-India base price of Rs 11,485 crore per Mhz - which is the highest price for any telecom radiowave.
However, the total potential revenue from the spectrum sale, expected to be held during May-June this year, is more than double of gross revenue of telecom services industry. Telecom service providers had gross revenue of Rs 2.54 lakh crore in 2014-15 financial year.
The last auction held in March 2015 fetched the government record bids of over Rs 1.1 lakh crore.
Trai for the first time has suggested a base price for 700 MHz band which is considered as the most efficient frequencies for high-end mobile services.
However, leading operators had requested the regulator to defer sale of 700 MHz spectrum, saying that ecosystem for providing services in this band was not developed and sale would lead to underutilisation of the spectrum for several years and block industry's crucial fund.
The regulator in its spectrum pricing recommendations for seven bands, including 700 Mhz and 800 Mhz, suggested a base price of Rs 2,873 crore per MHz for pan-India 1800 MHz frequency band - widely known as 2G spectrum. The new price is about 31 per cent higher than the base price fixed by the government in March 2015 auction.
However, it can fetch bids worth about Rs 2,492 crore as just 21 Mhz quantum of spectrum is available for auction.
For 3G spectrum in 2100 band, Trai suggested pan-India base price of Rs 3,746 crore, which could be the second largest contributor attracting bids of about Rs 63,000 crore.
On spectrum held by the Defence, Trai said that if Defence shifts to the designated Defence Band and its assignment in all the circle is restricted to maximum 20 MHz, around 201 MHz additional spectrum can be made available for commercial purpose in 1800 Mhz band.
The Ministries of Telecom and Defence are currently working to harmonise spectrum which will free huge chunk of airwaves for commercial use.
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After 3G spectrum, auction of all airwaves in 2500 Mhz band can garner bids of Rs 30,800 crore at Trai recommended pan-India base price of Rs 817 crore as sufficient airwaves are available for commercial use.
Similarly, 2300 Mhz band at a base price of 817 crore per Mhz can fetch bids worth Rs 15,000 crore, while 800 Mhz at suggested price of Rs 5,829 crore per Mhz can get about Rs 17,700 crore. 900 Mhz band could yield Rs 5,555 crore bids.
"The ability of the operators to pay for spectrum will be constrained as realised rate for voice and data are not growing, in fact declining for last few quarters and the balance sheets are already overstretched and there is not adequate appetite for equity in the market," Deloitte Haskins & Sells LLP Partner Hemant Joshi said.
He said that the timing of auction should be carefully considered so that all players can effectively participate.
As per the regulator, the 800 Mhz band can be auctioned only 10 circles. Trai has suggested about 60 per cent higher base price for this band compared to Rs 3,646 crore fixed in the last auction.
The Department of Telecom has indicated to Trai that only 37.5 MHz may be put to auction from the total available spectrum of 76.25 MHz in 800 Mhz band, which is also very high in demand for 4G services.
There is only 9.8 Mhz available for sale in 900 Mhz range. Spectrum in this band, ideal for voice and data services, had attracted bids worth Rs 75,165 crore in last auction.
To increase supply of spectrum, the regulator has recommended to take back 1800 MHz band spectrum assigned to Aircel in Haryana and Madhya Pradesh and Tata Teleservices in Himachal Pradesh as well as 800 MHz band spectrum assigned to Tata in West Bengal and Quadrant (Videocon) in Punjab and put these frequencies on auction.
The regulator has recommended that the entire available spectrum in 2100 MHz band, including spectrum taken back from STel should be auctioned.
STel 2G permits were cancelled in 2012 by the Supreme Court but its holding in 3G band, in Bihar, Orissa and Himachal Pradesh, remained unaffected by the order. The company later closed its operations in India and the regulator said that its 3G spectrum can now be put for auction.
The regulator in the consultation paper showed that right to use spectrum of state-run MTNL is also expiring in 2016 but the Department of Telecom later informed it that it will expire in 2019. Hence, it did not recommend auction of spectrum held by MTNL.
Trai had mooted removing band-wise spectrum limit in the consultation paper but it has suggested status quo in its recommendations.
"The Authority recommends that existing provision of a cap of 25 per cent of the 'total spectrum assigned' in 700/800/900/1800/ 2100/2300/2500 MHz bands and 50 per cent within a given band in each of the access service area shall apply for total spectrum holding by each telecom service provider," the regulator said.
Any company interested in buying 700 Mhz spectrum will
need to buy minimum of 5 Mhz which at proposed price would amount to Rs 57,425 on pan-India basis. However, the price of the spectrum varies from circle to circle, with the highest being in Delhi at Rs 1,595 per Mhz and the lowest in North East at Rs 44 crore per MHz.
Successful winner of 700 Mhz band will have to roll out service within five years of getting spectrum across all towns and villages having population of 15,000 or more but less than 50,000.
All villages having population of 10,000 or more but less than 15,000 to be covered within seven years of effective date of allocation of 700 Mhz band spectrum, Trai said.
Similarly, Trai has suggested minimum bidding of 1.25 Mhz quantum in 800 Mhz band, 0.2 Mhz in 900 Mhz band and 1800 Mhz each, 5 Mhz in 3G band, 10 Mhz each in 2300 Mhz and 2500 Mhz band.
A new entrant in the telecom mobile services segment will need to bid the highest chunk of spectrum available in 800 Mhz with maximum of 5 Mhz and in slot of 1.25 Mhz each. Similarly in 900 Mhz, the new entrant will require to bid for 5 MHz if at least one chunk of contiguous block of 5MHz is available.
The 900 Mhz and 1800 Mhz were earlier used for 2G services. Now some telecom operators have deployed 3G service in 900 Mhz and 4G in 1800 Mhz band.
The regulator has suggested network roll out condition for 900 and 1800 MHz bands should be treated as separate bands if a licensee deploys different technologies in these bands. This would be applicable for the existing licensees also who have acquired spectrum through auction of 2012 and onwards.
The regulator has recommended 5 year services roll out period for winner of 2300 Mhz and 2500 Mhz for new bidder but no additional roll-out obligations should be imposed on companies already holding spectrum in these bands and acquire additional block in upcoming auction.
