The Telecom Regulatory Authority of India (TRAI) on Wednesday recommended auction of 700 MHz spectrum for the first time in the country at a pan-India reserve price of about Rs.11,500 crore per MHz. The 700 MHz spectrum is considered to be the most suitable for offering high speed broadband services. However, the operators had asked the sale to be held back till the device ecosystem is put in place. The cost of delivering mobile services in 700 MHz band is also approximately 70 per cent cheaper than 2100 MHz band (used for 3G services).
The regulator has recommended that entire available spectrum in the 700 MHz band and 2100 MHz band be put on sale in the upcoming auction.
On spectrum held by the Defence, the regulator said if Defence shifts to the designated band and its assignment in all the circles is restricted to maximum 20 MHz, around 201 MHz additional spectrum can be made available for commercial purpose.
Further, it has recommended that DoT, in coordination with Defence and the service providers, should complete the harmonization process in the 1800 MHz band before upcoming auctions so that the entire spectrum that is made available due to this exercise is placed for bidding.
For 1,800 MHz spectrum –widely used for offering voice services—the reserve price of Rs. 2,873 crore has been recommended. For spectrum in 900 MHz band, 800 MHz band, 2100 MHz band and 2300 MHz band, the reserve price has been kept at Rs.3,341 crore, Rs.5,819 crore, Rs. 3,746 crore and Rs. 817 crore, respectively.
The regulator has recommended that the reserve price for 2500 MHz spectrum, which is also on the offer for the first time, to be kept equal to that of 2300 MHz spectrum.
The recommendation will now go to the Telecom Commission after which it will be placed before the Cabinet for final approval. The next round of auction is expected to be held in May-June this year. The last auction in 2015 had fetched the government a record Rs. 1.1 lakh crore. It sold spectrum across 800 MHz, 900 MHz, 1,800 MHz and 2,100 MHz bands.
The 700 MHz band, which has been priced four times than that of 1800 MHz band, is important for the industry which is looking to capitalise on the growing demand for data services.
Scarcity of spectrum has been cited by operators as one of the main reasons for call drops and poor data speeds. However, experts said that the auctions will put further pressure on the debt-laden telecom industry.
“The ability of the operators to pay for spectrum will be constrained as realized rate for voice and data are not growing and 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,”said Hemant Joshi, Partner, Deloitte Haskins & Sells LLP.
He said for 700 MHz band, a pricing at four times the reserve price of 1800 MHz is very ambitious, especially when the ecosystem is not fully developed.
The potential benefits, he said, may need significant investment and lead time before being realized.
Besides, though TRAI had mooted removing band-wise spectrum limit in draft paper, it has stuck to existing rules.
