The Telecom Regulatory Authority of India (TRAI) on Saturday announced reserve prices for CDMA (800 MHz band) spectrum, putting minimum cost of pan-India per MHz of radiowaves at Rs.2,685 crore, almost 50 per cent jump for the last auction's base price. Of 22 telecom circles, the top five service areas in terms of their reserve price are - Delhi Rs.450 crore per MHz, Mumbai Rs.352 crore, Maharashtra Rs.282 crore, Tamil Nadu Rs.247 crore and Gujarat Rs.212 crore.
"Authority recommends that the reserve price for the forthcoming auction of 800 MHz spectrum should be fixed at 80 per cent of the average valuation...The entire available spectrum with the Department of Telecom in the 800 MHz band should be put to auction," the telecom sector regulator said in its recommendation 'Reserve Price for Auction of Spectrum in the 800 MHz Band'. The auction for the 800 MHz spectrum is likely to take place later this year or early next year.
In its recommendations, the TRAI has said that the government should carve out a contiguous block of 5 MHz frequencies before conducting the auction. At present contiguous blocks are available only in 5 service areas -- Mumbai, Maharashtra, Madhya Pradesh, Assam and North-East.
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The auction be conducted in blocks of 1.25 MHz and it should be mandatory for new entrants to win at least 5 MHz of spectrum especially in the contiguous blocks. "However, an existing TSP (telecom service provider) i.e. a TSP having some spectrum holding in the 800 MHz band should be permitted to bid for a minimum 1 block of spectrum. New entrants must be assigned the earmarked contiguous carriers only," it added.
The regulator has also recommended that the entire CDMA spectrum held by the telecom PSU MTNL in Delhi and Mumbai be put up for auction as it is underutilised, besides suggesting that spectrum held by BSNL should be taken back and put for auction, except for one block of frequency in Jammu and Kashmir, Assam and North-East service area.
Significantly, for the 800 MHz band spectrum auction held in March last year, the serve price was Rs.1,800 MHz per MHz. Here only Sistema Shyam Teleservices Ltd (SSTL) had bought spectrum for eight circles for Rs.3,639 crore. When contacted for its reactions of the latest recommendations, SSTL spokesperson refused to comment saying that they were still studying and examining it.
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However, telecom industry sources say as in the case of recently concluded auction for 900 MHz and 1800 MHz spectrum, the government had to bring down spectrum reserve prices to make the auction more attractive, there is high possibility that this time too the DoT would intervene and cut the reserve prices or else there will be no taker for the radiowaves. The CDMA telecom operators also feel that harmonisation of frequencies may take months or even years, delaying the auction of 800 MHz band. Arranging one block of contiguous spectrum will require reassignment of frequencies already by held by existing users.
According to Deloitte Haskins & Sells Partner Hemant Joshi: "The reserve price...has been increased by more than 45 per cent (compared to March 2013). The rationale of higher price has been given as efficiency of the 800 MHz spectrum band, enthusiasm in the just concluded auctions and usage of this band for next generation technologies. However, deployment of next generation technologies is possible and feasible only when contiguous and adequate spectrum is available in the said band."
"The decision regarding contiguity and quantum would be taken by DoT, which would be important determinant factor for success of the upcoming 800 MHz auctions. As large operators have recently bid in the just concluded 900 MHz and 1800 MHz auctions, even though the said spectrum could be utilised for launching of next generation services, their appetite for the upcoming auction may be limited as industry has paid Rs.61,000 crore and the balance sheets are highly leveraged.
Telecom companies are likely to first focus on deployment of services in the currently won spectrum," he added.