Trai had in 2018 submitted the reserve price for 5G spectrum in the 3300-3600 MHz band, but this was not put up for the auction held in March this year.
Telecom operators hoping for a reduction in the reserve price for 5G spectrum, the auction for which is expected next year, may be in for some disappointment. The Telecom Regulatory Authority of India (Trai) is unlikely to review the price unless the department of telecommunications (DoT) specifically asks for the same and provides grounds for seeking a change.
Trai had in 2018 submitted the reserve price for 5G spectrum in the 3300-3600 MHz band, but this was not put up for the auction held in March this year. Though the industry has said several times that the price fixed for it is on the higher side, Trai is of the view that reducing the reserve price without testing the markets is not the right approach and would render its methodology faulty.
“How can one say that there are no takers for the spectrum at this price when it has not been auctioned so far?” sources in the Trai asked. The right approach would be that it first be put up for auction and if there are no takers, its price be reviewed. Alternately, the DoT should write to the Trai stating that it apprehends that operators may not come forward to buy at this price so it should be re-examined, the sources added.
Sources said Trai had recommended the reserve price for the mid-band airwaves after studying the utility of spectrum while also taking into account global references. The regulator had undertaken consultations with the industry too. “If Trai reduces the reserve price without any specific reference for it and reasons underlined, it would mean that the methodology to determine the price earlier was faulty. Moreover, one has to test the market first before terming the price as too high,” one of the sources said.
According to the sources, the DoT is expected to send a reference to Trai soon seeking the reserve price for the additional 5G bands which are to be added for the auctions. About 70 MHz spectrum will be added in the mid-band, so the DoT feels this would automatically mean that the regulator would review the prices for the entire lot, including the one for which it had earlier given the price. But sources in Trai clarified that merely adding 70 MHz does not call for revision of the earlier proposed reserve price. “In case the DoT wants this to happen, it has to state specifically why it wants the price to be reduced. Otherwise, for the mid-band, the reserve price will remain unchanged while for other bands, a new price will be proposed by Trai after due consultations,” a Trai source said.
Officials in DoT are of the view that the pricing needs to be relooked for 5G as the earlier price recommendations came in 2018 and the auction will now happen in 2022. Between then and now several developments have taken place in the world of 5G. But it has not categorically said so far that it would seek lower reserve prices than what was proposed earlier.
The DoT has to seek pricing for the millimetre wave band (24.25 GHz to 28.5 GHz) and the 600 MHz spectrum band, which can be used for 5G services. Apart from that, revision of the 700 MHz pricing will also be undertaken as the band remained unsold in two consecutive auctions.
In 2018, Trai had recommended a reserve price of Rs 492 crore per Mhz for the 3300-3600 MHz band. The price meant that for a pan-India minimum block of 20 MHz, operators would have to shell out Rs 9,840 crore, which was seen as steep. As telcos need about 100 MHz to offer pan-India 5G services, this price means they would need to shell out Rs 49,200 crore.
High reserve price of spectrum acted as a dampener in the March auctions. For instance, of the total 2,308 MHz of spectrum put on auction which at reserve price was worth Rs 3.92 lakh crore, only 37% of airwaves got sold and two bands – 700 MHz and 2500 MHz – drew a blank.