The Department of Telecom has written its first set of guidelines for the auction of 2G spectrum in the 1800 MHz and 800 MHz bands following the February 2, 2012 Supreme Court order which mandates that auctions must be held by August 2012.

The Telecom Ministry is contemplating a multiple round, ascending, e-auction, which will stipulate service area-wise bidding based on a reserve price for each service area.

No reserve price yet

Incidentally the Group of Ministers is yet to conclude on the reserve price after Pranab Mukherjee demitted office as its Chairman and Sharad Pawar resigned within a short period of replacing Mr. Mukherjee. Only once a new chairman is in place can the decisions be made.

In the 1800 MHz band, a minimum of 8 blocks of 1.25 MHz (10 MHz) will be put to auction in all service areas. In addition, a provision may also be made for spectrum up to 3 blocks each of 1.25 MHz (3.75 MHz), wherever available, for topping up the 8 blocks of spectrum put for auction. In the 800 MHz band, 3 blocks each of 1.25 MHz (3.75 MHz) will be auctioned. In addition, a provision may also be made for spectrum of one block of 1.25 MHz wherever available, for topping up the 3 blocks of spectrum put to auction to meet the requirement of new entrants, if such exigency arises.

Existing operators will be “allowed to bid” for one block of 1.25 MHz while new entrants will be “required to bid for a minimum” of 2 blocks of 1.25 MHz. New entrants will also be allowed to bid for one additional block of 1.25 MHz.

After opposing revenue maximisation for nearly five years since 2007, the draft guidelines accept amongst its objectives, “maximise revenue proceeds from auctions within set parameters. Additional objectives include obtaining a market determined price through a transparent process; ensure efficient use of spectrum and avoid hoarding; stimulate competition in the sector and promote roll out of telecom services.”

As recommended by the TRAI, spectrum in any band can be used for providing any service within the scope of service licence using any technology. DoT has called this “liberalised spectrum”.

Companies are allowed to convert their existing 1800 MHz spectrum to “liberalised spectrum” for a period of 20 years on payment of auction determined price.

However, this 20-year period will be subject to licensee acquiring a Unified License on expiry of existing licence. The entry fee already paid may be adjusted on pro rata basis only on one occasion when the licensee converts their spectrum into “liberalised spectrum.”

While spectrum will be auctioned for a 20-year period, roll out obligations, terms of payment and annual spectrum usage charges will be notified separately. DoT will issue M&A guidelines from time to time which will be applicable for intra-service merger of licence. The final licence agreement will also include penalties as defined in the NIA in case of spectrum hoarding.

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