GSMA calls for ‘reasonable’ reserve prices for spectrum

3 Feb 2016

International mobile industry group the GSM Association (GSMA) has criticised the high reserve price recommended by the Telecom Regulatory Authority of India (TRAI) for 700MHz spectrum in the upcoming auction, and called for the government to set prices at ‘reasonable levels.’ As previously reported by CommsUpdate, the Indian watchdog set a reserve price of INR114.85 billion (USD1.69 billion) per MHz (paired) of pan-India spectrum in the 700MHz range, with prices per circle ranging from INR440 million (North East) per MHz of paired spectrum to INR15.95 billion (Delhi). In its statement, the GSMA noted that India has one of the lowest levels of ARPU in the world at around USD2.45, adding that competitive pressure on revenues, high capital expenditure and the ‘so far limited revenue contribution from data services’ would make it difficult for operators to recover from high spectrum prices. Moreover, the association stressed that the high base prices left cellcos with less capital to invest in the rollout of new networks.

‘Spectrum’s greatest value does not come from high sale prices, but rather from its use to expand social and economic opportunity for all of India’s citizens,’ the GSMA’s chief regulatory officer, John Giusti said, adding: ‘As the digital economy becomes increasingly important to India’s future prosperity, we encourage greater focus on the long-term benefits of connecting more people in India to affordable mobile broadband, rather than on short-term financial gain…Setting reserve prices at reasonable levels will be key to achieving the Digital India objectives, allowing operators to focus their resources on building the necessary infrastructure to deliver high-quality mobile services for Indian citizens.’

India has had mixed results from spectrum auctions in recent years. According to TeleGeography’s GlobalComms Database, the government raised INR1.1 trillion from the sale of airwaves in the 800MHz, 900MHz, 1800MHz and 2100MHz bands in March 2015, although the amount was inflated somewhat by incumbent operators striving to repurchase existing concessions under pressure from acquisitive newcomer Reliance Jio Infocomm (RJIL). Similar conditions also helped drive up prices in the February 2014 auction, which raised INR611.6 billion, with operators scrapping over highly sought-after 900MHz and 1800MHz spectrum. Sales in November 2012 and March 2013 fared far worse, however. With little incentive for the larger incumbents to weigh-in, and investor confidence in the sector at an all-time low following the mass licence cancellation in February 2012, the November 2012 tender brought in less than a quarter of the anticipated INR138.5 billion. Similarly, in March 2013 only one bidder took part in the auction for 800MHz frequencies, leaving large quantities of spectrum unsold and unused.