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    GSMA asks Telecom Commission to slash base price of 4G spectrum

    Synopsis

    GSM Association (GSMA) has exhorted the Telecom Commission to reduce the starting price of 4G airwaves in the coveted 700 Mhz band.

    ET Bureau
    KOLKATA: London-based global mobile operators’ lobby group, GSM Association (GSMA) has exhorted the Telecom Commission to reduce the starting price of 4G airwaves in the coveted 700 Mhz band recommended by the telecom regulator, failing which, the airwaves “could remain unsold” in the next spectrum sale likely in July.

    “The GSMA is concerned that, if the Telecom Commission maintains the current reserve prices for 700 Mhz spectrum, there is the risk of a failed auction or, at a minimum, serious limitations on investment capability in next generation networks, denying the enabling social and economic power of this important spectrum resource to the citizens of India,” said John Giusti, Chief Regulatory Officer, GSMA in an official statement Thursday.

    Back in January, the telecom regulator had pegged the base price of a unit of 700 Mhz spectrum at Rs 11,485 crore, which translates to a whopping Rs 57,425 crore (or $8.5 billion approx) for a pan-India 5 MHz block.

    “In the event that the spectrum reserve prices are not reduced, the Indian government runs the risk that the spectrum will go unsold, as happened in Australia and recently in Senegal,” said Giusti, underscoring the importance of adjusting the reserve prices for India’s forthcoming 700 Mhz spectrum auction to meet the objectives of increasing mobile broadband penetration.

    Accordingly, the GSMA has urged the Indian government to “reconsider the auction reserve prices in order to better reflect local market conditions, allow competition in the market to determine fair prices for this spectrum, and help meet its objectives of increasing mobile broadband access for all”.

    The Telecom Regulatory Authority of India has suggested auctioning seven bands of 2G, 3G and 4G airwaves, that can potentially garner nearly Rs 5,44,000 crore for the government, or about five times the sum raised at the previous sale in 2015.

    Giusti, however, warned that a “failed auction would be extremely damaging not only for the Indian mobile industry, but also for the country’s economy overall, depriving citizens and businesses to the full potential of high quality mobile broadband services”.

    According to the GSMA official, “the reserve prices for this much-needed spectrum are unrealistic in relation to the economics of the mobile industry”.

    “In fact, the total recommended reserve prices of Rs 5,36,239 crore (over $80 billion) for the spectrum bands in the auction are almost double the cost of all spectrum investments to date in India, which equates to more than 20 times the annual free cash flow of the entire mobile industry in India,” said Giusti.

    Thr GSMA, however, welcomed the Modi government’s recent decision to reduce spectrum usage charges (SUC) from 5% to 3%, calling it "a step in the right direction," but maintained that "it would not do enough to offset such high spectrum prices". In competitive markets like India, setting reasonable reserve prices would allow auction mechanisms to work in determining the market price in assigning the spectrum, the GSMA said.


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    ( Originally published on Apr 28, 2016 )

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