TRAI launches consultation for third round of spectrum sales

24 Jul 2013

The Telecoms Regulatory Authority of India (TRAI) has released a consultation paper regarding the upcoming third round of spectrum sales since the mass licence cancellation in February 2012. Industry stakeholders have been given until 14 August to submit their replies, and 21 August for subsequent counter-comments.

In addition to the spectrum freed up by the quashed concessions, the TRAI has reiterated its proposals that the government take back 2×2.4MHz of spectrum in the Delhi and Mumbai circles from state-backed cellco Mahanagar Telephone Nigam Ltd (MTNL), on the basis that the frequencies are being insufficiently utilised. The authority outlined its difficulties in determining plans for refarming the 900MHz spectrum, such as the staggered allocation of licences – which will expire between 2014 (metro circles only) and 2024 – and the need to reserve 1800MHz/1900MHz airwaves for those operators to potentially migrate to.

On the controversial matter of reserve prices, the TRAI has suggested a number of potential methods for valuing the spectrum, but stopped short of suggesting a price tag for the frequencies. The TRAI did, however, acknowledge that setting the reserve prices at the estimated value of the frequencies may have deterred potential bidders from participating in previous auctions. The regulator also claimed that base prices that were too low were vulnerable to collusion amongst bidders that would be just as harmful to the outcome of the sale as excessively high prices.

Interestingly, the TRAI pointed out the need for consolidation in the market, noting: ‘Presently, there are six to ten operators in each service area. However, because of the large number of operators in each [service area], there is cut-throat competition which has adversely affected the financial health of operators and the industry. Due to unsustainable pricing and slow revenue growth, their EBIDTA is under pressure. The current state of industry is not sustainable in the long term and measures like consolidation etc might be required to improve its financial health.’ Further, the authority acknowledged that the large number of operators in each area drastically limited the available spectrum resources of each provider.