Spectrum auction: Trai cuts reserve price but telcos not too enthused

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New Delhi | Updated: August 2, 2018 3:18:42 AM

TRAI has recommended the reserve price for the next round of auctions, which is considerably lower than what was fixed for the 2016 auctions but still on the higher end considering the industry’s financial position.

Spectrum auction: Trai cuts reserve price but telcos not too enthused

The Telecom Regulatory Authority of India (Trai) on Wednesday recommended the reserve price for the next round of auctions, which is considerably lower than what was fixed for the 2016 auctions but still on the higher end considering the industry’s financial position.

For the 5G band in 3300-3600 MHz where the prices have been given for the first time, at Rs 492 crore per MHz, for a pan-India minimum block of 20 MHz operators will have to shell out Rs 9,840 crore, which is seen as steep.

For the premium 4G spectrum though, Trai has reduced the reserve price by 43% at Rs 6,568 crore per MHz; still, for a pan-India 5 MHz block operators would have to shell out Rs 32,840 crore.
Going by global standards the price of Rs 492 crore per MHz for 5G spectrum is on the higher side as the South Korean auctions that happened just a month ago had the price at Rs 130 crore per MHz.

At the moment the ecosystem for 5G services is not developed so even if auctions are conducted and operators win the spectrum they will have to wait for a considerable period before it can be effectively used.

No wonder the Cellular Operators Association of India (COAI) came out with a lukewarm response to the reduced reserve prices. “We are glad that the government has decided to bring down the price of spectrum, especially in the 700 MHz band. It is, however, important to note that considering the current financial stress the industry is going through, lowering the spectrum price alone doesn’t fix anything. Until and unless the spectrum usage charges, licence fees and other levies are lowered as well, the industry may not be able to cope with the technologies required to roll out 5G,” said Rajan S Mathews, DG, COAI.

While the recommendation for 5G spectrum is a fresh one, for other bands the prices have been reduced since either there were no takers for spectrum in the 2016 auctions (700 MHz) or spectrum remained unsold then.

Trai has this time pegged the price of 800 MHz band at Rs 4,651 crore per MHz, down 20% than the previously recommended price. This band of spectrum is also used for 4G services.
Trai has recommended that the entire spectrum — 4948.55 MHz — available should be put up for auction without giving any time frame within which the auctions should be held. If the entire spectrum gets sold at the reserve price the government would get around Rs 5,01,690 crore as revenue.

The basic approach adopted by Trai for fixing the reserve price in the 800, 900, 1800 and 2100 MHz is that the base price should be higher of the two figures — 80% of the average valuation of spectrum band in the licensed service area or the price realised in the October 2016 auction. The price of the 700 MHz band now is equal to twice the reserve price of the 1800 band. In the 2016 auctions it was fixed at four times the price of 1800 MHz.

For 5G spectrum in 3300-3600 MHz band, Trai has said that the minimum block size should be of 20 MHz. However, to avoid monopolisation, it has added that there should be limit of 100 MHz per bidder. Since the operators are allowed to trade their partial or complete spectrum holding to another operator, it has said that the limit of 100 MHz spectrum in 3300-3600 MHz band shall also apply for spectrum trading.

In the 2016 auctions, the government had mopped up a total of `65,789 crore, 4% over the reserve price, from the country’s six operators that participated in the bidding. However, this was a lukewarm response as only 965 MHz spectrum got sold against a total of 2353 MHz put up for sale, meaning that only 40% got sold.

While the 700 MHz band saw no takers, only 15 MHz spectrum was sold in the 800 MHz band out of a total of 73.75 MHz. In 1800 MHz, 175 MHz was sold against 221 MHz put on sale. In 2100 MHz only 85 MHz was sold against 360 MHz. In 2300 MHz all the spectrum was sold, whereas in 2500 MHz 370 MHz was sold against 600 MHz.

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