"The Union Cabinet today approved the finalisation of the reserve price for auction of spectrum in 1800 MHz band for all service areas and for 900 MHz band in Metro service areas of Delhi, Mumbai and Kolkata," an official statement said.
The Cabinet, headed by Prime Minister Manmohan Singh, fixed the start price for the sale of spectrum in the 1800 mega-Hertz band at a pan-India rate of Rs 1,765 crore per MHz, about 26 per cent lower than the base price in the March sale.
"The reserve price for 1800 MHz band of Rs 1,765 crore per MHz Pan India, which works out to be Rs 8,825 crore for 5 MHz Pan India," the statement said.
The Cabinet has approved recommendations made by the Empowered Group of Ministers on telecom, headed by Finance Minister P Chidambaram.
The high level ministerial panel had recommended that any new entrant will be required to bid for minimum of 5 Mhz in 1800 Mhz or in 900 Mhz band.
Sources at the Telecom Ministry said that they will make efforts to start the auction by January 21 and the Notice Inviting Application (NIA) may be issued in the next couple of days.
Telecom operators, whose licences are not expiring in 2014, have been allowed to bid for minimum of 600 kilohertz of spectrum in 1800 Mhz band and 1 Mhz in 900 Mhz band as per the EGoM recommendations.
The maximum quantum of spectrum that a company will be able to bid will be mentioned in NIA which will be capped at 25 per cent of total spectrum allotted in a service area.
For the 900 MHz band, it approved a rate up to 53 per cent lower than the previous auction price.
The reserve price for 900 MHz band is Rs 360 crore per MHz for Delhi, Rs 328 crore for Mumbai and Rs 125 crore for Kolkata, the statement said.
The EGoM had suggested fixing the base or minimum price for the auction of spectrum in the 1800 MHz band at pan-India price of Rs 1,765 crore per MHz, 15 per cent higher rate, than suggested by telecom regulator TRAI of Rs 1,496 crore.
The base price of 900 Mhz band accepted by EGoM is also 25 per cent higher than what was suggested by the Telecom Regulatory Authority of India (TRAI).
The government has decided to auction 403.2 MHz of 2G spectrum in the 1800 MHz frequency, which at the base price finalised by the Cabinet, amounts to about Rs 36,385 crore.
About 46 MHz of spectrum in the 900 MHz band held by Bharti Airtel, Vodafone and Loop Mobile in Delhi, Mumbai and Kolkata will also be auctioned as their licences are due to expire in the last quarter of 2014.
At the base rate finalised by the Cabinet, the spectrum in the three metros may fetch about Rs 12,300 crore.
Together, the 900 MHz and 1800 MHz band airwaves are valued at about Rs 48,685 crore.
The government has provisioned garnering Rs 40,874.5 crore from spectrum revenue in the Budget, including upfront money from the auction and various fees levied on airwaves used for commercial mobile communications.
Successful bidders, however, will have the option of paying the spectrum price in instalments.
If the entire spectrum is sold at the base price and bidders opt to pay in instalments, the government may get only about Rs 15,000 crore in this fiscal from the auction.