DoT shows no mercy; raises spectrum price further, rules out staggered payments or financial assistance

23 May 2012

India’s Department of Telecommunication (DoT) has reportedly added to the woes of industry players by further increasing the already controversial proposed base prices for spectrum in the upcoming frequency re-auction. The minimum prices suggested by the Telecoms Regulatory Authority of India (TRAI) have sparked waves of protests, and threaten to hinder future foreign investment in the sector, as international providers have warned that they will quit the market should the proposals be accepted. The TRAI set a base price of INR36.22 billion (USD651.75 million) per unit of pan-India spectrum in the 1800MHz band but the DoT has suggested that the price should be raised to INR42.45 billion per unit. Further rubbing salt in the wound, the DoT ruled out a proposal that would allow cellcos to stagger payments for spectrum and has said that frequencies cannot be mortgaged to raise funds from financial institutions. The watchdog has also rejected conciliatory proposals that would have reduced the price of spectrum for CDMA operators. India’s Telecom Commission, the apex authority for the sector will meet tomorrow to discuss the proposals of the TRAI and DoT and either accept them or call for certain areas to be reconsidered.

Justifying its proposed price increase, an official from the DoT said: ‘[The] TRAI had determined the reserve price in the 1800MHz band based on the 3G auction price of 2010. We feel that [the] 3G auction price must be indexed for a period of two years to determine the present value of spectrum. During this period, State Bank of India’s PLR [Prime Lending Rate] rates have been between 11.75%-14 .75% and therefore the revised figure works out to INR4,245 crore [INR42.45 billion] for every unit of 2G spectrum in the 1800MHz band.’

In related news, the DoT has also deferred the appointment of auctioneers for the upcoming frequency tender, despite pressure on the regulators to conclude the sale quickly. The regulator gave no reason for the delay, but said it would publish a revised timeframe for the spectrum auction process shortly. The DoT has invited bids from companies to conduct the sale and has now extended the deadline for bids to 11 June, with an auctioneer to be chosen on 20 June.