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DoT Guidelines For 2012 2G Spectrum Auction; Bid Price?

The Department of  Telecom (DoT) has posted a notice on its website announcing guidelines for the upcoming 2G spectrum auction, however, it has not announced the minimum bidding price for the auction. According to the guidelines, spectrum in 1800 Mhz (GSM) and 800 Mhz (CDMA) would be allocated in the upcoming auction. Following the verdict in the 2G spectrum allocation scam, the Supreme Court had cancelled 122 licenses of 22 operators, and had asked the government to conduct fresh auctions. The Supreme Court had extended the deadline for the auction of 2G licenses which were cancelled by it, from June to 31st August 2012, and has asked telcos whose licenses were cancelled to continue services till 7th September. The government has not been able to come up with the base price for the auctions.

Some of the highlights from the guidelines: 

– Eligibility: Interestingly, existing license holders (Mobile telephony/ Universal Service Access) or any entity that fulfills eligibility for obtaining a unified license qualifies to participate in the auction, along with licensees whose license were cancelled following the Supreme Court verdict in the 2G spectrum allocation scam. However, the latter will be treated at par with new applicants.

– Amount of spectrum & Number of Blocks:

In GSM band: The government intends to auction 8 blocks each of 1.25 MHz (Total 10 MHz) in the 1800 MHZ GSM spectrum band. In addition to these, the government might auction 3 additional blocks of 1.25 MHz each in the same band to meet the requirements of new entrants, if the situation requires. So in total a maximum of 11 blocks might be auctioned(13.75 MHz) in the 1800 MHz band.

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Existing operators will be allowed to take maximum two blocks of 1.25MHz.

New entrants (including the ones whose licenses were cancelled) are required to bid for a minimum of 4 blocks of 1.25 MHz, and will also be allowed to bid for one additional block.

In CDMA Band: The government intends to auction 3 blocks each of 1.25 MHz (Total 3.75 MHz) in the 800 MHZ CDMA spectrum band. In addition to these, the government might auction 1 additional block of 1.25 MHz  in the same band to meet the requirements of new entrants, if the situation requires. So in total a maximum of  4 blocks might be auctioned( 5 MHz) in the 1800 MHz band.

Existing operators will be allowed to bid for one block of 1.25MHz.

New entrants (including the ones whose licenses were cancelled) are required to bid for a minimum of 2 blocks of 1.25 MHz, and will also be allowed to bid for one additional block.

The validity period of spectrum would be 20 years.

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Liberalisation: The assigned spectrum can be used for providing any service within the scope of the respective service license using any technology. So this might mean that players who have a UAS license could use the spectrum for offering wireless broadband on the same band, for example use it for 4G or 3G as recommended by the TRAI.

Also, existing providers may be allowed to convert their 1800MHz 2G spectrum to liberalized spectrum for 20 years on payment of an auction determined price, but this is valid if the licesnsee acquires a unified license after its existing license expires. The DoT might adjust the entry fee on a pro-rata basis for these licensees.

Auction Process: The government will conduct a simultaneous, multiple round e-auction. Bidding would be service area wise The reserve price would be set for each service area.

The department has also clarified that it will issue guidelines on mergers and acquisitions from time to time , and that information on roll out obligations will be notified separately.

TRAI’s recommendations:

The TRAI had earlier recommended that auction of spectrum should be conducted in multiple rounds. It had also said that auctions should be open to all incumbents holding CMTS/UAS licenses, however not to those that hold spectrum above the prescribed cap. The authority had recommended a reserve price of Rs 3,622.18 crore per MHz in 1800 MHz band, Rs 7244 crore in 800 and 900 MHz band, and Rs 14,000 crore in 700 MHz band for spectrum auctions. It had also recommended refarming of spectrum in the 900 MHz band, which is more cost effective for telcos.

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The COAI(Cellular Operators Association of India), AUSPI(Association of Unified Telecom Service Providers of India, and GSMA had expressed dismay at the high prices and had requested the government to revisit the process.

Related:
Supreme Court Extends Time Limit For Fresh 2G Auctions Till 31st August 2012
TRAI Recommends Higher Base Auction Prices; Telcos Express Dismay
Implications Of Cancellation Of 122 2G Telecom Licenses In India & What Happens Next

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