Trai favours auction of 2G spectrum in phases

Regulator to take final call after consultations

Telecom companies hoping to get additional 2G spectrum relatively cheap are in for disappointment, as the regulator favours a phased auction. The Telecom Regulatory Authority of India (Trai) is of the opinion that the spectrum, which will be available with the government as a result of the Supreme Court order cancelling 122 licences issued in 2008, should not be auctioned in one go.

According to top sources in Trai, about 28 Mhz of 2G spectrum will be available on average in each circle after the court order is implemented.

“We do not think that putting the entire spectrum for auctioning in one go would be the way as this could impact prices. However, we have to take a final decision on it, apart from how many blocks and the size of spectrum in each block that will be auctioned based on the consultation process," said a source in Trai.

THE AUCTION SCENARIO

28 Mhz 
The average 2G spectrum to be available in each circle after the court order is implemented

Final call
The regulator to take final decision after consultations 

SC directive
The Supreme Court on Thursday directed Trai to make fresh recommendations for the auction route within four months 

Eligibility
The 8 telcos whose licences have been cancelled will have to apply again for a UASL before they are eligible for auction after 4 months

Price point
Unlike the 3G auctions when prices hit the roof, most companies do not have the financial appetite to buy expensive spectrum

Current rule
Under the rules, telcos have to fork out v

No. of bidders
If allowed, the six current 2G operators might also bid, raising the the total number of potential bidders to around 12. This does not include BWA operators who also want 2G spectrum

The regulator’s view is key in establishing a transparent price for 2G spectrum, as the Supreme Court yesterday directed Trai to make fresh recommendations for the auction route within four months.

The regulator’s view is certain to dampen the spirits of many telcos that have been hoping the auction price for 2G spectrum will be muted, partly because of the large availability. Also, unlike the 3G auctions when prices hit the roof, most companies do not have the financial appetite to buy expensive spectrum.

Under the current rules, telcos have to fork out Rs 1,651 crore for a pan-India unified access service licence (UASL) that comes bundled with 4.4 Mhz of spectrum. However, with the Supreme Court judgment, the licence will be delinked from spectrum. And, spectrum will be auctioned. Trai officials are also of the opinion that new UASL players will be permitted to participate in the upcoming auction. However, a call has to be taken whether incumbents like Bharti and Vodafone, who might want more 2G spectrum to meet their voice needs, and broadband wireless access (BWA) players such as the Mukesh Ambani-owned Infotel that could take a UASL licence will also be allowed.

The eight telcos whose licences have been cancelled will have to apply again for a UASL before they are eligible for auction after four months. The pricing of the UASL licence, which will not come bundled with any spectrum, will also be fixed by the government.

“According to our understanding of the judgment, the 122 licensees whose licences have been cancelled will have to apply once again. They have not been blacklisted,” said a Trai source.

The companies whose licences have been scrapped are Uninor (a joint venture between Norway’s Telenor and Unitech Group), Sistema Shyam (a JV between Russia’s Sistema and Shyam Telecom), STel, Videocon, Idea Cellular, Tata Teleservices, Loop Mobile and Etisalat DB (a JV between the UAE’s Etisalat and Swan Telecom).