The need for a realistic reserve price, in tune with the industry’s sentiments, is seen as essential because in a three-player market, the spectrum typically gets sold at the base price. If the price is not in line with the industry’s expectations, the spectrum could remain unsold.
Further, there is hope of a departure from the current methodology of fixing the reserve price where the last auction price becomes the base price. This has emanated from the fact that the Trai plans to meet all telecom operators, as well as equipment providers, to get the industry’s perspective before it starts a formal consultation process.
Bharti Airtel chairman Sunil Mittal recently spoke about the need to explore alternate models of spectrum pricing. “Spectrum should be priced appropriately for India. If you go back to the 2010 auction of 3G and BWA, that was the starting point of the problem. Pricing went 5-6-7 times from the reserve price that became the bane of this industry as there were 6-7 players for three slots. Now whatever reserve price you put, spectrum will mostly go at that price as there are not many competitors,” Mittal said.
The department of telecommunications has already sent a reference to the regulator seeking a fresh reserve price for 5G spectrum in the 3300-3600 MHz band, along with that for the premium 4G band 700 MHz (which supports 5G services). In addition, the DoT has added around 70 MHz of spectrum in the mid-band like 24.25 GHz to 28.5 GHz, which also supports 5G services.
Trai has also been asked to suggest the fresh base price for the unsold spectrum in the previous auctions, held earlier this year, in bands like 800 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2300 MHz. Though Trai had, in 2018, submitted the reserve price for 5G spectrum in the 3300-3600 MHz, the auction for this band was not held in March. The DoT feels that by the time the next auctions take place, four years would have elapsed so a revision in prices is required.
As for the 700 MHz band , there were no takers in the last two auctions due to the high base price. This time neither the regulator nor the government wants to be embarrassed by the spectrum remaining unsold.
“The pricing needs to be relooked for 5G as the earlier price recommendations were made in in 2018 and the auction will happen in 2022. Already there have been many developments in the last few years regarding 5G,” an official in the ministry said. The government has also included more bands for 5G, for which price recommendations are required, the person added.
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 need 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 cough up Rs 49,200 crore.
Similarly, for 700 MHz band, although Trai had reduced the reserve price by 43% in the auctions which took place earlier this year than what it had recommended for 2016 auctions, still at `6,568 crore per MHz, for a pan-India 5 MHz block, operators would have had to shell out Rs 32,840 crore. Therefore all of it remained unsold.