MTS could benefit; Centre expects Rs. 30,000 crore revenue

The Empowered Group of Ministers (EGoM) on Monday recommended that the reserve price for auction of Code division multiple access (CDMA) spectrum in the 800 MHz band be reduced by up to 50%. If this proposal finds favour with the Cabinet, it will place 2.5 MHz of spectrum in the 800 MHz band at roughly Rs. 4,500 crore. MTS (a joint venture between Sistema of Russia and Shyam Telecom) could be a major beneficiary of this move.

The company has argued that it was wrongly punished by the February 2012 decision of the Supreme Court, which cancelled licences granted illegally by the former Telecom Minister A Raja. The hearing of the curative writ petition is scheduled for January 10. In the event that the court rules for reinstatement of its licences, there will be no need for MTS to participate in the upcoming auctions.

The government earlier fixed the reserve price of CDMA spectrum at 1.3 times that of GSM but it saw no takers at all.

Telecom Minister Kapil Sibal said, “All the auctions for which announcement has been made today [Monday] will be held in March 2013.”

According to DoT Secretary R. Chandrashekhar, the total revenue expected from both 900 and 800 MHz bands is upwards of Rs. 30,000 crore. The government has reduced its revenue expectations from the spectrum auctions owing to a weak response last November when against a target of Rs. 40,000 crore, only Rs. 9,407 crore was realised. However, the November auctions, compared on a per MHz basis, earned roughly six times the revenue earned by Mr. Raja while allocating spectrum on a first come, first served basis in 2008.

Other key decisions

Other key decisions include auction of 1800 MHz of CDMA spectrum in circles where no bids were received in November. The Cabinet has already approved a reserve price which is 30 per cent lower than that set for the November auctions. Spectrum in the 900 MHz bands will be auctioned in the metros of Delhi, Mumbai and Kolkata for which the reserve price was fixed earlier at double that for 1800 MHz. Spectrum in the 800 MHz band will be auctioned in all circles.

“In the 1800 MHz band, the quantum of spectrum put up for auction would be 15 MHz for Delhi and Mumbai, while for Karnataka and Rajasthan it will be 10 MHz with a top-up provision of 3.75 MHz as in the November 2012 auctions,” said Mr. Sibal.

In Delhi and Mumbai, spectrum in the 900 and 1800 MHz bands will be auctioned simultaneously with 15 MHz in the 900 MHZ band to be auctioned in multiples of 1.25 or 5 MHz wherever possible with 1 MHz extra for the guard band while 12.5 MHz will be put on the block in Kolkata. Licensees whose licences will come up for renewal in November 2014 hold 16 MHz in the 900 MHz band and 14 MHz in the 1800 MHz band.

According to Mr. Chandrashekhar, the two bands are being auctioned simultaneously as those who fail to win back the 900 MHz spectrum will have to bid for 1800 MHz so that they can continue their operations. “Rolling out operations in the 1800 MHz band will require at least 18-24 months. Similarly, if a bidder wins 900 MHz for the first time, he will need lead time to set up infrastructure,” he told The Hindu.

Option for telcos

DoT sources say telcos are likely to participate in these auctions as they have the option of bidding in the 1800 or 900 MHz bands or both. It further allows those who did not have spectrum in the 900 MHz band so far, to acquire it.

However, Rajan Mathews, director-general, Cable Operators Association of India, said though the reduced reserve prices were a step in the right direction, they were still too high, with fundamental flaws in the pricing process. “There are legal infirmities in refarming of the 900 MHz band which will be tested in court.”