700-MHz spectrum price may be slashed 20%

The department of telecommunications (DoT) has begun the process for the next round of auctions, which is likely to witness 15 to 20 per cent reduction in the base price for the 700-MHz premium band that went unsold in the previous airwave sale in October 2016. The next auctions could be held by year-end.
 
According to an analyst, Telecom Regulatory Authority of India (Trai) is expected to revise the floor price downwards, in line with what it did ahead of the 2013 spectrum auctions.
 
The government had switched to auctioning of spectrum instead of awarding the licences on a first come, first served basis, after the 2G scam under then minister A Raja.
 
Trai had earlier slashed the combined spectrum auction reserve price in the premium 900-MHz band in the circles of Delhi, Mumbai and Kolkata by about 79 per cent to Rs 650 crore per MHz against Rs 3,074.18 crore per MHz earlier, following industry representations. This time, the price decline may not be that steep.
 
Cellular Operators Association of India (COAI) Director General Rajan S Mathews said the optimum base price for the 700 MHz premium band would be the same as 800 MHz, keeping in mind the fact that ecosystem for operating the premium airwave band is yet to be established and may be done in a couple of years from now.
 
The 700-MHz band is considered premium due to its efficiency and higher penetration inside buildings and wider coverage.
 
In January 2016, Trai had suggested Rs 11,485 crore per MHz as pan-India base price for the 700 MHz spectrum, the first time the premium band was put up for auction. However, the band went unsold during the bidding process in October, last year, due to the high base price.
 
The government had fixed a pan-India reserve price of Rs 5,819 crore for 800MHz band.
 
The auction that started on October 2 ended after five days, with the government selling nearly 50 per cent of the total spectrum offered. Total revenue the government garnered was Rs 65,789 crore, way lower than the targeted amount of Rs 5.63 lakh crore at the base price.
 
Meanwhile, an analyst pointed out that the amount of spectrum available with the telecom companies is sufficient to sustain for a few years as some of the spectrum licenses would expire in 2021, therefore an auction at this point in time is not even needed.
 
“In the presence of 4-5 telecom players, the fear of cartelization looms large that was not the case in the previous auctions because of 10-12 companies. The competition was cut-throat then,” a Mumbai-based analyst said.