The Telecom Regulatory Authority of India (Trai) today proposed that the pan-India base price for spectrum in the 700MHz band – the plum band for high-speed data services – be set at Rs 11,485 crore in the forthcoming auctions.
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While TRAI has fixed the reserve price for airwaves across seven bands including the much-awaited 700 MHz needed for faster 4G roll out, industry experts doubt if telecom companies can buy the entire radio waves on offer given the high debt levels.
As per TRAI’s paper, the cost of delivering mobile services in 700 Mhz band is approximately 70 percent lower than 2100 Mhz band, which is widely used for 3G services. If all available frequencies get sold at the suggested price then it alone can contribute over Rs 4 lakh crore.
The reserve price of $1.7 billion per MHz for pan-India 700MHz spectrum for deploying 4G services on 700MHz will be insufficient to offset the relatively high price.
The 700MHz will be auctioned for the first time in the upcoming auction, expected in May-June. Earlier auctions conducted in the month of March 2015 generated revenue of more than Rs 110,000 crore for the government which is the highest amount till date. Furthermore, the regulator’s approval in September 2015 to allow spectrum sharing and trading will allow telcos to buy or share spectrum among themselves, and could make bidding in spectrum auctions unattractive. It added that an additional 201 MHz of spectrum (in 1800 MHz band) could be attained for commercial goal if the defence ministry shifts to the designated defence band, and its assignment is restricted to 20 MHz maximum.
Trai reiterated that to calculate spectrum cap, all spectrum assigned to the TSPs including any spectrum which was put to an auction but remain unsold, spectrum which was assigned but subsequently surrendered by the TSP or taken back by the licensor and spectrum put to auction should be counted. “Fitch believes that smaller and weaker telcos will further seek mergers and acquisitions or exit the industry, in light of the high spectrum prices and stretched balance sheets”. Trai has also recommended auction of spectrum in 900 MHz in six service areas – Gujarat at base price of Rs673 crore per MHz, Karnataka for Rs558 per MHz, Haryana for Rs151 per MHz, UP East for Rs776 per MHz, UP West for Rs739 MHz and Bihar for Rs444 per MHz.
Leading telecom operators like Bharti Airtel, Vodafone India, Idea Cellular and Reliance Jio Infocomm oppose the sale of 700 MHz bandwidth now looking at the reserve price.
The Authority recommended that the same eligibility criteria that have been made applicable for other bands viz. 800 MHz, 900 MHz, 1800 MHz and 2100 MHz band in January 2015 NIA should be made applicable for 2300 MHz and 2500 MHz bands. It recommended a block size of 5 MHz for the auction.
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Reliance Jio, after having invested about $15 billion on spectrum and networks, has access to the pan-India 800MHz spectrum, it said. The company has experience in managing spectrum in the 2,300 MHz band and it intends to plug gaps in eight circles where it does not have this frequency.
