Trai for joint auctions; reserve price for 3G at Rs 2,720 cr/MHz

The Telecom Regulatory Authority of India on Wednesday said that since the defence ministry has conveyed that it has agreed in principle to…

Spectrum auctions, spectrum auctions in india, spectrum auctions 2015, 3g spectrum, Mobile operators, 5 MHz spectrum, defence ministry, DoT

The Telecom Regulatory Authority of India on Wednesday said that since the defence ministry has conveyed that it has agreed in principle to swap 15 MHz of spectrum in the 2100 MHz band in lieu of an equal amount of spectrum in the 1900 MHz band, the government can now go ahead and conduct simultaneous 2G and 3G auctions.

In its recommendations to the department of telecommunications (DoT) on the reserve price of 3G spectrum in the 2100 MHz band, Trai has said that 3G auctions can be held even if spectrum is not available immediately because the actual assignments do not have to happen immediately. It has said that the actual date of assignment may be given in the notice inviting applications.

With this, the decks have been cleared for simultaneous auctions of 2G and 3G spectrum, against the DoT’s initial stand that the auctions be split — 2G in February and 3G in May.

FE was the first to report about the defence ministry informing Trai and DoT of its willingness to swap 15 MHz spectrum in the 2100 MHz band with an equal amount of spectrum in the 1900 MHz band.

With Trai’s clear stand on simultaneous auction due to availability of 3G spectrum, mobile operators should be a relieve lot as otherwise prices of airwaves in the 900 MHz band would have shot through the roof, making their business case go awry.

Had the swap not been agreed to, auction bids would have spiralled in the critical 900 MHz spectrum frequency band. In this band, there is 184 MHz of spectrum up for auction across 18 circles, and telcos need to retain this to continue their services. In which case, it requires just one new telco to bid up prices astronomically. If, however, there is 15 MHz of pan-India 2100 MHz spectrum available — this translates into 270 MHz of spectrum in the 18 circles where auctions will be held — the auction bids will not spiral out of control.

However, what has not made the operators happy is the reserve price recommended by Trai for 3G spectrum auction at Rs 2,720 crore per MHz on a pan-India basis. At this rate, for a minimum block of 5 MHz the rate would come at Rs 13,600 crore. The reserve price at Rs 2,720 crore on a per-MHz basis is 19% lower than the Rs 3,349 crore realised price on a per-MHz basis in the 2010 auction. That year the per-5-MHz realised price on a pan-India basis was Rs 16,745 crore.

For arriving at the reserve price Trai has taken a mean of the four valuation approaches — indexation, using the State Bank of India’s base rate, of the 2010 auction determined prices; technical efficiency factor of 0.83 times of 1800 MHz spectrum valuation; the producer surplus model; and the approach based on growth in data usage.

Auction of 3G spectrum is also important because none of the operators have pan-India spectrum in this band, which led them to enter into intra-circle roaming pacts that the government pronounced illegal. Though the telecom tribunal ruled in favour of such agreements, the DoT has appealed against its decision in the Supreme Court. With 15 MHz spectrum, operators can achieve a pan-India footprint. Trai has said that if three to four blocks of 5 MHz spectrum in 3G is available, each operator can bid for a maximum of two blocks in each circle. This way the maximum holding an operator can have in a circle (if it currently holds 5 MHz) is 15 MHz.

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