Cabinet approves USD80bn spectrum sale, defers decision on SUCs

23 Jun 2016

India’s cabinet has approved the nation’s largest auction of mobile frequencies but has deferred a decision on the spectrum usage charge (SUC) that will apply to spectrum bought through the tender and how the overall SUC will be calculated, the Economic Times reports. The tender will feature a combined total of more than 2,200MHz of spectrum across multiple bands, worth more than INR5.44 trillion (USD80.31 billion) – based on the reserve prices for the airwaves. The upcoming tender will include frequencies in the 700MHz band for the first time, although the reserve price of INR574.25 billion for 2×5MHz block of pan-India spectrum is expected to limit telcos’ interest in the airwaves. Indeed, the head of industry body the Cellular Operators Association of India (COAI) commented that: ‘We are glad that the spectrum shortage issue has been addressed but pricing is a concern.’ Consequently, only around 40% to 50% of the frequencies are expected to sell, with spectrum in the 1800MHz, 2100MHz and 23000MHz ranges expected to be in the highest demand as operators look to plug gaps in their existing holdings.

Regarding the SUC, the cabinet referred the matter back to the Telecom Regulatory Authority of India (TRAI) for its views. The Telecom Commission had previously green-lit proposals for the rate to be lowered from 5% of annual gross revenue to 3%, with the rate extended to 4G spectrum purchased in 2010. Spectrum from the sale would also be excluded from the weighted average formula used to calculate overall SUCs for each cellco, although the TRAI had previously recommended the introduction of a flat SUC of 3% for all airwaves.