Licence auction to get underway in November

28 Aug 2012

India’s Department of Telecommunications (DoT) has published a memorandum outlining the details for the auction of spectrum in the 1800MHz and 800MHz ranges as ordered by the Supreme Court in February. Applications to participate in the tender are due by 19 October, with bidding for frequencies in the 1800MHz range to begin on 12 November whilst bidding for the 800MHz spectrum will start two days after the previous round of bidding ends.

10MHz of 1800MHz spectrum is up for auction in each circle, broken down into eight 1.25MHz blocks. Existing operators may take no more than two blocks per circle, whilst newcomers are required to bid for at least four blocks in each circle. For the 800MHz range, 3.75MHz is up for grabs in each area, split into three blocks of 1.25MHz. Existing operators are allowed to bid for only one block per service area, whilst new entrants must bid for at least two.

In addition to the auction cost for spectrum, successful bidders must also pay spectrum usage charges based on a percentage of the company’s adjusted gross revenue (AGR) depending on the quantity of frequencies won by the cellco. GSM operators with up to 4.4MHz must pay 3% of AGR, rising to 8% for companies with up to 15.2MHz. CDMA providers with up to 5MHz of spectrum must pay 3% of AGR, increasing to 8% for up to 15MHz.

In terms of reserve price for frequencies, minimum bids vary from service area to service area with the least lucrative circles, namely Assam (INR86.7 million [USD1.56 million]), Himachal Pradesh (INR77.8 million), Jammu and Kashmir (INR63.3 million) and North East (INR88.4 million) priced far below the more desirable metro circles of Mumbai (INR6.784 billion), Calcutta (INR1.137 billion), and Delhi (INR6.930 billion).

Norwegian teco Telenor, which has been battling with its former partner Unitech over the future of joint venture cellco Uninor, has said that it will carefully study the DoT’s conditions before deciding whether or not to take part in the auction. The company has reiterated its earlier threat of shutting up shop if the DoT’s terms are deemed unreasonable. Another of the operators whose licences were cancelled in February this year, Russian-backed cellco Sistema Shyam TeleServices (SSTL), has called for the Indian parliament to rule that Sistema be excluded from the Supreme Court’s decision. According to the Business Standard, SSTL indicated in a missive to the Indian government the amount that it would seek in compensation and damages, arguing that resolving the dispute through discussions would be more cost-effective than allowing the matter to go to international arbitration.