TRAI suggests slashing spectrum prices by more than 60%

10 Sep 2013

The Telecom Regulatory Authority of India (TRAI) has recommended cutting the reserve price of 900MHz and 1800MHz spectrum by more than 60% in some circles, in a bid to drive up participation in upcoming spectrum auctions. The recommendation suggests a reserve price of INR1.75 billion (USD26.99 million) per MHz of 1800MHz spectrum in the Delhi circle, compared to base costs of INR6.93 billion and INR4.85 billion in the November 2012 and March 2013 auctions respectively. Under the plans, 900MHz spectrum prices in the three metro circles would drop by even greater amounts, with the cost for airwaves in Delhi falling by 70%, compared to 72.4% in Mumbai and 56% in Kolkata. Whilst the lowering of auction prices for spectrum will be a boon to providers, the TRAI has stood by its controversial decision to refarm 1800MHz and 900MHz spectrum. Cellco’s whose concessions for those bands are due to expire will be required to bid for them in auction to continue offering services, rather than simply renewing their existing authorisations through talks with the government, as prescribed by their licences.

The TRAI recommendations also suggest a flat rate of 3% of annual gross revenues for spectrum usage fees, rather than a value based on the amount of spectrum held by a provider. Spectrum trading will also be allowed under the watchdog’s proposals, with a number of caveats. Operators will only be permitted to trade spectrum which has either been obtained through auction or for which the provider has paid the market value to the government and a transfer fee of 1% of the transaction amount or the market price of the spectrum (whichever is higher) will be imposed on the transferee. Finally, the TRAI has expanded on rollout obligations for licensees, instructing new providers to cover all villages with a population of 5,000 or more within five years of the allocation of spectrum, expanding to all settlements with a population of more than 2,000 within seven years. Existing cellcos licensed before 2008 have two/four years from 1 April 2014 to meet the two milestones, whilst those licensed after 2008 have five/seven years.

Commenting on the proposals, The Economic Times quotes Telecom Minister Kapil Sibal as saying: ‘We are very happy by and large with the positive nature of the recommendations … they are industry friendly and recognise the ground reality of the market … not only will [the] government get its revenue but [the] market will also be able to purchase spectrum at reasonable prices.’

Arvind Bali, the CEO of wireless provider Videocon has complained that the reserve price for the November 2012 auction was wrong and that those who bid paid inflated prices. Complaining that the upcoming auctions might not even touch the reserve prices of the November auction, Balis said: ‘We strongly recommend that the excess money paid by us – i.e. the difference between the price paid by us and the successful bid price of the upcoming auction – should be refunded back to us either in monetary terms or through additional spectrum.’