Decision on spectrum pricing likely on Friday

DoT states it will need 70 days to start auction after it gets final approval from EGoM or Uninon Cabinet

The Empowered Group of Ministers (EGoM) on telecom, headed by Finance minister P Chidambaram, which is scheduled to meet on 22 November, is likely to discuss the next course of action of the upcoming auction that is expected next year.

The Department of Telecommunications has stated that it will need 70 days to start the auction after it gets the final approval from the EGoM or the Uninon Cabinet (if needed), according to a recent communication.

Among other issues, the EGoM is likely to take the final decisions on the reserve price of spectrum that would be auctioned across different bands – 1800Mhz, 900MHz and 800MHz.

It will also decide the block size and quantum of spectrum that DoT would auction. The key issues also include decision on whether the Government would auction 900MHz spectrum for Delhi, Mumbai and Kolkata where some operators’ licences are due for renewal next year.

The EGoM will also discuss availability of contiguous spectrum in different circles, whether there would be any reservation of spectrum for the 900MHz spectrum holders. It will also deliberate the much-discussed issue of spectrum usage charges (SUC) which the Telecom regulatory Authority of India (Trai) has recommended to be uniformed at flat three% for all licencees.

Other key issues include liberasation of spectrum for existing 1800MHz spectrum holders, and payment options that the Government would offer to the successful bidders.

In June, the EGoM had asked Trai to give its recommendations on valuation and reserve price of spectrum. EGoM’s decision came after the Government had received tepid response in auctions held in November 2012 and March 2013, even after bringing down the reserve price.

Trai has given its suggestions in September, recommending huge reduction in reserve prices of spectrum to be auctioned at about 37% for 1800MHz and 60% for 900MHz. The regulator had also suggested uniform SUC at 3%.

Following Trai’s recommendations, a committee of the DoT has reviewed the suggestions, and had sought clarifications on all the key issues, indicating that the recommended price was too low. Trai, however, had stuck to its original recommendations. The matter was then deliberated by the Telecom Commission which is the highest decision making authority at the DoT.

The Telecom Commission has finally decided to increase reserve price of spectrum from what Trai had suggested. While Trai had recommended the pan-India reserve price of 1MHz of 1800Mhz spectrum at Rs 1496 crore, the Telecom Commission had suggested the reserve price to be increased by 17.9% at Rs 1765 crore. For 900MHz, it has suggested a 25% increase in Delhi, Mumbai and Kolkata circles compared with what Trai had suggested.

According to the recent communication, the Government will auction 286.10Mhz of spectrum in 1800Mhz band, 30 MHz in 800MHz band and 46MHz in 900Mhz band. The Telecom Commission has suggested that the Government should keep the block size at 1.25Mhz each.

Meanwhile, the DoT Committee has opposed the proposal of uniform SUC, but the Telecom Commission has earlier said that it would take a decision on the issue before auction in consultation with the finance ministry.

Trai had also recommended that there is no need to auction the remaining 800MHz spectrum as there was almost no demand (except one operator that lost all its licences due to Supreme Court order) in the previous two auctions, and has suggested adoption of an extended GSM (EGSM) band, which could be used for 4G LTE operations and might fetch three-four times higher price.

But, both the DoT Committee and the Telecom Commission had opposed the proposal and decided to auction the 800MHz spectrum which is currently used by the CDMA operators.