NEW DELHI: Four years and three months after former telecom minister A Raja gave away pan-India GSM mobile spectrum at R1,658 crore, the Telecom Regulatory Authority of India (Trai) on Monday fixed the auction reserve prices for the same spectrum ten times higher.
Trai has set a steep reserve price at R3,622.18 crore for auction of per MHz spectrum in the 1,800 Mhz (GSM services) band. If the price is accepted by the government, a new operator would have to spend R18,110 crore for 5 MHz spectrum.
This is higher than the R3,500 crore reserve price the government set for auctioning per 5 MHz of 3G spectrum in 2010, which was in a more efficient band of 2.1 GHz.
This is higher than the auction discovered price of R16,750.58 crore for 5 MHz 3G spectrum in 2.1 GHz band. Simply put, as per the Trai’s recommendations, the value of 1 MHz 2G spectrum is higher than 5 Mhz of 3G spectrum.
The scenario for the operators whose licences have been cancelled by the Supreme Court’s February 2 order, which asked for auctioning the spectrum, would be something like this: a company like Uninor would have to shell out R18,110 crore just as the reserve price for pan-India spectrum. This would be after the company has invested around R14,000 crore in the country in creating its networks.
“While we study them in detail, it seems obvious that some of these recommendations will create a severe negative impact on the entire industry. It is up to the political leadership ofIndiato now ensure that the gains of the past few years of affordable phone calls forIndia’s people are not undone,” Uninor said.
For Sistema Shyam, a CDMA operator, the amount would go as high as R36,000 crore as the reserve price for the CDMA spectrum is double of GSM. The scenario is no different for incumbent operators like Bharti Airtel, Vodafone and Idea Cellular. While they have the choice of not participating in the auctions at such steep reserve price they get hit on two counts. One is that their licences come up for renewal between 2013-15 and they will have to pay for their existing spectrum at the auction prices, which could be as high as R30,000 crore. Two, the regulator has asked for taking away their 900 Mhz spectrum, which is a more efficient one and generates more revenue for them and auction it at a even higher reserve price of R7,224 crore per Mhz.
Going by the Trai recommendations while the newer operators would find it difficult to enter the market, the existing operators would find it very difficult to sustain their operations.
No wonder Vodafone was the first operator to express concern at the recommendations. “Vodafone India is deeply concerned to read the Trai recommendations. We believe that several of these recommendations are retrograde and if accepted, will do irreparable harm to the industry. It will hamper the ability to connect the unconnected and goes against the objectives of National Telecom Policy of ensuring improved rural tele-density and right to broadband”.
Telecom industry bodies, both GSM and CDMA — COAI and Auspi — were unanimous in crticising the recommendations, stating in a joint statement that they vehemently express their concern and disapproval of these recommendations and term them as being arbitrary, regressive and inconsistent. “The industry was looking forward to reasonable spectrum reserve price recommendations from Trai in the light of the government’s own articulated policy directions on affordability, rural penetration, etc,” the joint statement said.
Analysts said that at such a steep and unreasonable price no bids would come for auctions. To make up for the unreasonably high reserve price, the Trai has suggested a 10-year payment period with an initial moratorium of two years.
In coming out with the reserve price and auction calendar the Trai seems to have resorted to creating scarcity where none exists. For instance, it has stated that the available spectrum in the 1,800 Mhz band is 629.4 Mhz but has suggested to the government that in the current fiscal only auction of 5 Mhz spectrum be done for each of the 22 circles. This means that where 629.4 Mhz is available auctions would be conducted in the current year for only 110 Mhz.
This scarcity approach would affect the players whose licences have been cancelled. A total of nine operators lost their licences but in the first batch of auction only one would be able to get enough spectrum to provide the services.