Telcos could sink with Trai planning Rs 4.6-tn auction

The telecom regulator has advised the Department of Telecom (DoT) to price pan-India airwaves in 700 MHz band at Rs 11,500 crore, in 800 MHz band at Rs 5,820 crore, in 900 MHz band at Rs3,340 crore, in 1800 MHz band at Rs2,873 crore, 2100 MHz band at Rs 3,746 crore, in 2300 MHz band at Rs817 crore and in 2500 MHz band at Rs 793 crore. The telecom regulator for the first time has suggested the base price for 700MHz which is considered as the most efficient frequencies for high-end mobile services. “While there will be action around the 700 MHz and 2100 MHz (3G) bands, incumbents are likely to take a pick-and-choose approach if there is no rationalisation of the suggested base prices”, Mathews added. It provides wider coverage which reduces number of towers required and significantly cuts down the capex.

The Authority recommended that DoT should ensure that the spectrum surrendered by TTSL is not kept idle and takes appropriate legal remedies to put it in the upcoming auction.

Trai has, however, eased roll-out obligations for services using the 700MHz band.

Trai has essentially pegged the value of the 700MHz band at four times the last price of the 1,800MHz band spectrum, a calculation operators say is flawed. Operators might not be able to bid aggressively in this new band as the benefits will trickle only in the longer run.

The regulator has recommended that entire available spectrum in the 700 MHz band and 2100 MHz band be put on sale in the upcoming auction. Currently, spectrum trading in 2300/2500 MHz band is permitted in the block size of 20 MHz. The suggested price of 1800MHz band is about 31% higher than the base price fixed by the government in March 2015 auction. This is the highest reserve price fixed for a band ever since the process for spectrum auction started almost five years back.

“The 700 MHz spectrum band is a lower frequency band and has better propagation characteristics as compared with other high-frequency spectrum bands”.

Existing provision of a cap of 25 per cent of the “total spectrum assigned” in 700/800/900/1800/ 2100/2300/2500 MHz bands and 50 per cent within a given band in each of the access service area shall apply for total spectrum holding by each TSP. In the higher bands of 2300 MHz and 2500 MHz, used for broadband, the regulator has proposed a pan-India price of Rs 817 crore each.

The 900 MHz will be put up for auction only in six circles.

The Telecom Regulatory Authority of India (TRAI) on Wednesday recommended that there is no “plausible reason” to change present restrictions on overall spectrum holding and in a frequency band.

Earlier, the government had fixed the highest base price at Rs 3,980 per MHz for 900 spectrum band in the last auction.

In the 2,300 MHz (first auctioned in 2010), 320 MHz will be put up for sale and in 2,500 MHz, 600 MHz will be put up for sale.

The Trai recommendations are part of a pricing exercise that the regulator conducts prior to every auction to determine the minimum price at which the airwaves should be sold.

“The ability of the operators to pay for spectrum will be constrained as realized rate for voice and data are not growing and in fact declining for last few quarters and the balance sheets are already overstretched and there is not adequate appetite for equity in the market,”said Hemant Joshi, Partner, Deloitte Haskins & Sells LLP”.