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India Sets 2G Spectrum Auction Reserve Price At $2.5 Bn For GSM, $3.2 Bn For CDMA; Timeline

The Indian Government has finalized the reserve price of spectrum, for the upcoming 2G spectrum auction following recommendations from its Empowered Group of Ministers (EGoM)

For GSM: a reserve price of Rs 14,000 crores (around $2.5 billion) has been set for 5 MHz pan India in 1800 MHz Band
– For CDMA: a reserve price of Rs 18,200 crore ( around$3.2 billion) in the 800 MHz band, 1.3 times that of 1800 MHz band.

The price is lower compared to the TRAI’s recommended reserve price of Rs 18,100 crore for 5MHz of spectrum in the 1800 MHz band, and more than Rs 36,000 crore for 800 MHz band.

Other decisions

– Spectrum Usage Charges: The cabinet has also approved the existing slab rate system for Spectrum Usage Charges (SUC), which ranges between 2-7% of the operator’s annual revenues, depending on the spectrum quality and whether the operator has 3G spectrum in the country.
– Defer issues on pricing spectrum for existing providers: However, it has deferred its decision on issues related to pricing of spectrum and on pricing of spectrum held by existing providers, pricing of contracted spectrum, excess spectrum, and prospective or retrospective pricing, citing pending ascertainment of developments/ outcome of the ongoing proceedings before the Supreme Court in the Presidential Reference.

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What’s Next

With the reserve price being finalized, the government can decide on a timeline for the 2G auction, as telcos whose licenses were cancelled by the Supreme Court in its verdict, approach the 7th September deadline. However, note that 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, including those whose license were cancelled following the Supreme Court verdict in the 2G spectrum allocation scam.

Timeline of Events

Here’s a timeline of events following the Supreme Court Verdict in the 2G Spectrum Allocation Scam case:

– 2nd Feb 2012: Supreme Court cancels 122 licenses of 22 operators and directed the Government to conduct fresh auctions for sale of the spectrum within a period of four months, asking the TRAI to come up with fresh recommendations.

– 5th March 2012: The Indian government files a review petition in the Supreme Court in response to the Court’s verdict in the 2G spectrum allocation case, asking the court to only review the part of the order where it had deemed the ‘ first-come-first-serve’ spectrum allocation policy of the government flawed.

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– 24th April 2012: The TRAI comes out with recommendations on spectrum reserve price, and also proposes refarming in the 900MHz band, and liberalization of spectrum. Telcos express dismay as they feel the price is steep.

– 24th April 2012: The Supreme Court extends the deadline for the auction of 2G licenses which were cancelled by it, from June to 31st August 2012, and asks telcos whose licenses were cancelled to continue services till 7th September.

– 5th July 2012: The Department of  Telecom (DoT) posts a notice on its website announcing guidelines for the upcoming 2G spectrum auction,  including eligibility, amount of spectrum and number of blocks, however, it did not announce the minimum bidding price for the auction.

– 24th July 2012: Reports suggest that the Empowered Group of Ministers (EGoM), the minister panel responsible for finalizing rules for the upcoming 2G spectrum auction, has recommended a reserve price of Rs 14,111 crore and Rs 15,111 crore for a block of 5 MHz of spectrum in the 1800 MHz band on a pan-India basis.

– 3rd August 2012: India’s Cabinet of Ministers sets 2G auction price.

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