EGoM to seek Trai's views on spectrum pricing

To ask regulator to give recomendation in 60 days

The empowered group of ministers (EGoM) on telecom has decided to seek fresh views from the Telecom Regulatory Authority of India (Trai) on the reserve price of the spectrum to be auctioned in the 1,800-MHz, 900-MHz and 800-MHz bands.

“The EGoM had a meeting for more than an hour today. It decided to refer the issue of spectrum pricing for the next auction to the regulator. We do not have any expertise to determine the reserve price of the spectrum. We will ask Trai to give its recommendations within 60 days,” said Kapil Sibal, minister of communications & information technology and a member of the EGoM.

In April, after two rounds of auction (November 2012 and March 2013) saw poor response from telecom operators, Planning Commission Deputy Chairman Montek Singh Ahluwalia had suggested Trai’s views be sought on the issue.

The EGoM said the Department of Telecommunications should keep the notice inviting applications ready so that the government could start the auction process immediately after it received Trai’s recommendations. “We want the auction to happen as soon as possible,” Sibal said, adding the notice inviting applications would be ready, though it wouldn’t mention the reserve price; DoT would add this after securing suggestions from Trai.

The EGoM didn’t take a decision on re-farming (re-allocation of spectrum). “No decision can be taken before the reserve price is determined,” the minister said.

It discussed two other options to finalise the reserve price of the spectrum to be auctioned — retaining the reserve prices for the 800-MHz, 900-MHz and 1,800-MHz bands decided by the Cabinet, and revising the price after considering the developments related to the auctions in November 2012 and March 2013.

“The decision will pave the way for a robust and exhaustive consultative mechanism in arriving at the right reserve price, which would fuel further growth of the Indian mobile telephony sector,” said Rajan Mathews, director-general, Cellular Operators Association of India. The association, which lobbies for incumbent GSM operators, said an auction was the right way to ensure fair and transparent allocation of spectrum.

The government has to conduct another round of auction to comply with the Supreme Court’s order dated February 15---the court had asked it to auction the entire spectrum available after licence cancellation.

The EGoM, headed by Finance Minister P Chidambaram, is expected to decide on the number of telecom circles in which the third round of spectrum auction should be conducted. It is also expected to discuss the payment mode for the next round of auction. Sibal, however, did not comment on the issue.

The government had, in the last auctions, given companies the option to pay upfront or in a deferred mode. In the deferred payment mode, a GSM telecom company pays 33 per cent (25 per cent for CDMA players) of the total bidding amount, with a two-year moratorium; the rest is paid in 10 equal instalments, which attract interest of 9.75 per cent.

In November 2012, the government earned Rs 9,407.64 crore by auctioning 1,800-MHz spectrum. Though it had auctioned 176 blocks (1.25 MHz each) of the 198 blocks, it recorded bidders for just 101 blocks. Due to the high reserve price, Mumbai, Delhi, Karnataka, and Rajasthan did not record any bidder. For the auction in March, the government reduced the base price for these circles 30 per cent. It had also cut the base price of the 800-MHz spectrum 50 per cent, after it failed to attract bidders during the auction in November.

In March, only Sistema Shyam Teleservices bid for spectrum in the 800-MHz band, for select circles.