Trai suggests Rs 11,485 crore/Mhz rate for premium 700 Mhz band

NEW DELHI: The telecom regulator has recommended the largest ever spectrum auction, including a debut for 4G airwaves in the 700 MHz band with a starting price of Rs 11,485 crore a unit, drawing protests from telecom companies that it would be too expensive.

At base prices, the auction of seven bands of 2G, 3G and 4G airwaves can generate almost Rs 544,000 crore for the government, or about five times the amount raised at the previous sale in 2015. The government needs funds to bridge its fiscal deficit after volatile market conditions curbed plans to sell stakes in state-owned companies.

The Telecom Regulatory Authority of India’s proposed price tag for the 700 MHz band — considered the most efficient and stable for 4G services — is the most expensive ever. It recommended a block size of 5 MHz for the auction.

“The 700 MHz spectrum band is a lower frequency band and has better propagation characteristics as compared with other high-frequency spectrum bands. This spectrum band is considered as premium spectrum band and is most suitable for Long Term Evolution (LTE) technology,” Trai said in a release. LTE is a standard of high-speed wireless data service.



It recommended that the reserve price of the 700 MHz band should be equal to four times the reserve price of the 1800 MHz band. Trai’s suggestions need to be approved by the Department of Telecommunications and the Cabinet.

The auctions are scheduled to be held in May-June. The previous auctions in March 2015 fetched over Rs 110,000 crore for the government, the largest amount till now.

Mobile phone operators Bharti Airtel, Vodafone India, Idea Cellular and Reliance Jio Infocomm oppose the sale of 700 MHz bandwidth now, given that the balance sheets of the telcos are stretched and compatible handsets globally are still being developed. On Wednesday, too, telcos and analysts echoed this view and said the base price for the 700 MHz band was too high and would result in muted interest.

Trai overlooked the fact that spectrum market dynamics, in terms of supply, has changed radically after the government announced norms for trading and sharing of airwaves, said Rajan Mathews, director-general of the Cellular Operators Association of India.

“Most serious players have retained their 900 MHz airwaves in key markets in the last auction and are in no tearing hurry to pay the moon for 4G airwaves in 700 MHz band,” Mathews said. “While there will be action around the 700 MHz and 2100 MHz (3G) bands, incumbents are likely to take a pick-and-choose approach if there is no rationalisation of the suggested base prices.”

Some were of the view that telcos, especially the bigger ones, might have no choice but to bid for the 700 MHz spectrum given that the bandwidth was the most cost-efficient and would be valid for 20 years.

Norway’s Telenor —in need for more data spectrum —has previously backed an early auction of the 700 MHz band, saying compatible devices were being developed at a good pace.

HIGH PRICE MAY OUTWEIGH BENEFITS Even so, Prashant Singhal, global telecom leader for EY, said the high price tag may outweigh the benefits. “Airwaves in the 700 MHz band are certainly more capex-efficient, which means they could be priced higher, but at this reserve price, a block of 5 MHz would cost over Rs 55,000 crore, which is way beyond the capex efficiency gains,” Singhal said.

Airwaves in the 800 MHz band — also used for 4G and among the most sought-after in the March 2015 sale —for the entire country barring three small circles of Jammu & Kashmir, Assam and the Northeast, would be the second-most expensive, priced at Rs 5,819 crore per MHz, a 60% increase from the minimum price of the previous auction.

The reserve price for the 2100 MHz band at Rs 3,746 crore is marginally higher than Rs 3,705 crore previously, while the base price for 1800 MHz spectrum has been set at Rs 2,873 crore compared with Rs 2,191 crore earlier. The government failed to sell much of this bandwidth because the spectrum was fragmented.

“There will be selective interest in this 3G band by those who need to fill in gaps in their coverage,” said a top telco official. The regulator recommended that the government must harmonise this frequency band to ensure adequate deployment of the spectrum.

Harmonisation is the process of making spectrum in any band contiguous at zero incremental costs. This would make the airwaves more efficient for data services and valuable as an auctionable resource.

The price of airwaves in the 2300 MHz and the 2500 MHz bands has been set at Rs 817 crore per MHz. The 2300 MHz band was first sold in 2010 and hasn’t been auctioned since due to technology issues, which delayed the 4G plans of holders such as Jio.