New Delhi, Sept. 9: Telecom regulator Trai today slashed the reserve price of 2G spectrum by as much as 65 per cent as it tried to reignite telecom companies’ interest in bidding for airwaves after two failed auctions in March and November last year.
The Telecom Regulatory Authority of India (Trai), which had been asked to look into airwave prices and the possibility of allowing telecom operators to trade in spectrum, said a pan-India spectrum in the 1800MHz band should be priced at Rs 1,496 crore.
That works out to a 37 per cent discount to the Rs 2,375.41-crore price that emerges after a revision of the reserve prices for four circles — Delhi, Mumbai, Karnataka and Rajasthan — that received no bids at last November’s auction.
Last November, the government auctioned spectrum in this band at Rs 3,500 crore for a 1.25MHz pan-India block. In March, the reserve prices for the four circles were brought down by 30 per cent but still found no takers.
The cuts are sharper in the 900MHz band, which is occupied by legacy players such as Airtel and Vodafone.
The regulator has sought a reserve price of Rs 288 crore per MHz for Delhi, Rs 262 crore for Mumbai and Rs 100 crore for Calcutta in this band. In contrast, in March this year, spectrum in this band was priced at Rs 970 crore for every 1.25MHz in Delhi and Rs 949 crore for a similar 1.25MHz in Mumbai.
The regulator is trying to force Airtel, Vodafone and Loop Telecom to give up their spectrum allotments in the 900MHz band when their licences come for renewal next year — which the legacy players are contesting.
“There should be no reservation of spectrum for the renewal licensees in 900MHz or 1800MHz bands. All bidders should be treated alike,” the regulator said in its eagerly-awaited recommendations.
Airtel and Vodafone are expected to go to court if they are forced to give up their lucrative spectrum in the 900MHz band in Delhi, Mumbai and Calcutta. Delhi and Mumbai have 22.2MHz each and Calcutta has 20.2MHz in the 900MHz band.
Vodafone and Airtel have 8MHz each in Delhi. Vodafone and Loop Telecom hold 8MHz each in Mumbai, while Bharti has 6.2MHz. In Calcutta, Bharti and BSNL have 6.2MHz each, while Vodafone holds 7.8MHz.
“These are fair and reasonable... we will take these recommendations forward,” telecom minister Kapil Sibal said after the recommendations were submitted.
The Cellular Operators’ Association of India, however, have demanded further cuts in the reserve prices, which the government does not seem to be in a mood to agree to.
Trai said it had “decided that the reserve price for the forthcoming auction should be fixed at 80 per cent of the average valuation”.
It decided to temper its revenue-raising expectations in the light of the slowdown of the economy and the weak balance sheets of telecom companies which had been saddled with the debt that they raised to pay for the 3G auction in May 2010.
It also noted that “the share of stressed assets in respect of the loans to telecom companies on the books of the banks has increased from 1.3 per cent in March 2011 to 15.64 per cent in March 2013”.
Trai also recommended permitting trading in spectrum between telecom firms and setting uniform flat spectrum use charges and rollout obligations for telecom firms.
“Reserve prices have been reducedů the 900MHz and 1800MHz spectrum are up for auction,” said Rajiv Khullar, chairman of Trai.
His recommendations will now have to be accepted by the department of telecom (DoT) and the group of ministers looking into telecom pricing before becoming a government policy.
The regulator said, “The authority is of the view that failure to sell spectrum in many circles in the last auctions of November 2012 and March 2013 has been a setback for both the government and the industry as the value embodied in the unsold spectrum has not been realised. The primary task is, therefore, to ensure that spectrum is sold in the forthcoming auction and the impasse does not continue.”
Officials expect actual auctions to happen only in November-December this year. The government was under pressure to lower the reserve prices after many telecom firms stayed away from bidding in the last two auctions, held in November 2012 and March 2013, citing high prices.
The regulator also said there should be no reservation of spectrum for the renewal licensees in 900 or 1800MHz bands. It said all bidders should be treated alike and no bidder should enjoy any priority because of prior spectrum holdings.
Trai ruled that for auction in the 1800MHz band, the block size should be of 2x200KHz each and an existing licensee will have to bid for a minimum of three blocks. New entrants will, however, have to bid for a minimum of 25 blocks of 2x200KHz each.
In the case of auction in the 900MHz band, the block size would be 2x1 MHz with the condition that all bidders would have to bid for a minimum of five blocks.
Trai said, “The DoT should come out with a clear road map before the upcoming auction, indicating the quantum of spectrum which will be available in the future along with the timelines so that licensees whose licences are due for renewal in 2015-16 can take an informed decision about bidding for spectrum in the 1800MHz band.”
It also stressed that eligibility conditions prescribed in the previous auctions should be retained for the upcoming auction and the rollout obligations for all telecom firms with spectrum would be the same.
“All villages having a population of more than 5,000 (are) to be covered within five years of the effective date of allocation of spectrumů and all villages with population of more than 2,000 are to be covered within seven years,” the Trai note to the government said.
Khullar said: “We have made three big policy prescriptions — uniform spectrum use charge, permitting spectrum trading and uniform roll-out obligations.” However, Trai made it clear that only that spectrum could be traded which had been bought through auction or for which market prices had been paid.
The regulator recommended that the government should extract a transfer fee of one per cent of the traded amount, or the prescribed market price for the spectrum, whichever is higher. This transfer fee will be paid by the spectrum buyer and not the seller.
Officials said the move to put the onus on the buyer had been done to avoid a situation where the spectrum was bundled as an intrinsic asset with the goodwill of the company and sold abroad as part of a global deal.
BID TO chart NEW CASH COURSE
@Reserve prices for Delhi and Mumbai were fixed at
Rs 693.06 crore and Rs 678.45 crore in the auction
held in November 2012. No bids were received for
them at that auction. The reserve prices were,
therefore, lowered in the March 2013 auction
# Four circles — Delhi, Mumbai, Karnataka and
Rajasthan — found no bidders in the November 2012.
The reserve prices were cut in the March 2013 auction.
The pan-India figure reflects the revised reserve
price for these four circles
Note: Trai said there was no need to determine a valuation or a
corresponding reserve price for 800MHz spectrum at present
CHANGING THE RULES
● No reservation of spectrum
for renewal licences in 900MHz or
1800MHz bands. All bidders
will be treated on par
● DoT must come up with clear road map indicating quantum of spectrum to be available in future
● Licensees whose renewals come
up in 2015-16 can then make an
informed decision on participating in the 1800MHz spectrum auction
● Spectrum auction in 1800MHz band will be in block sizes of 2X200KHz against 1.25MHz now
● Existing licensees will have to bid for at least 3 blocks in 1800MHz; new entrant must bid for minimum of 25 blocks of 2x200KHz each
● Spectrum in 900MHz will be in a block size of 2x1MHz against 1.25MHz now. Each bidder will have to bid for at least 5 blocks
● Same rollout obligations for all service providers
● Additional rollout obligations spelt out for existing licensees
● Telecom service providers must be allowed to convert existing 1800MHz spectrum into liberalised spectrum only for the balance validity period.
● Auction amount will be
pro-rated for the balance
● Auction in 800MHz should not be carried out now
● Spectrum use charges for
all auctioned airwaves should
be charged at a flat rate of 3%
of the adjusted gross revenue (AGR). Currently, it varies between
3-8% of AGR depending
on the quantum of spectrum
held by the licensee
● Spectrum use charge for broadband wireless access
(BWA) spectrum should also
be fixed at 3% of AGR
● Highest slab rate for spectrum usage charge should be brought down to 5% from April 1, 2014. This will apply for existing licences with bundled spectrum
● Spectrum trading should be permitted in the country
● Eligibility conditions for
spectrum trading and
participation in spectrum
auctions should be the same
● Only spectrum that has either been auctioned or on which market determined value has been paid can be traded
● Seller and purchaser must inform the government about
the spectrum trade; but no
permission will be required
● Trading transactions should
be subject to a cap of 50% of
the spectrum in a band and 25% of the total commercial spectrum in a licensed service area
● Transfer fee of 1% of
the transactional amount
or the prescribed market