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TRAI Recommends 37% Reduction In 1800 MHz Spectrum Price; 60% In 900 MHz

The Telecom Regulatory Authority of India (TRAI) has recommended (pdf) a reduction in price for the pan-India 2G license  to Rs 1,496 crore  from Rs 2,379 per MHz in 1800 MHz band (around 37% decrease). This comes after TRAI’s multiple attempt to auction 2G spectrum received a lukewarm response from the telecom operators as the base price was too high.

Besides this, the reserve price for the 900 MHz spectrum for Delhi, Mumbai and Kolkata circle have been reduced by 60% to Rs 288 crore, Rs 262 crore, and Rs 100 crore respectively. Note that licenses 900 MHz band of leading telecom operators in  such as Vodafone and Airtel are up for renewal next year. The 900 MHz band is more important as it can be used for 3G services. I expect carriers such as Idea, which did not buy 3G spectrum in key circles such as Mumbai to participate in the upcoming auction. Interestingly, the regulator did not mention about the 800 MHz band which is being used by CDMA players.

TRAI has also recommended that telcos to be levied with 3% of adjusted gross revenue (AGR) as spectrum usage charge (SUC). Prior to this, charged 3-8 percent for the same.

Telecom operators are also allowed to trade spectrum, even 3G spectrum, they bought albeit only through auctions. A transfer fee of one percent (1%) of the transactional amount or prescribed market price will be levied on the transferee, to be paid to the government.

While the government has made recommendations about the spectrum price and charges, it does not clearly mention the roadmap for the auction.

2G Spectrum Allocation Timeline

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

– Feb 2, 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.

– March 5, 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.

– April 24, 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.

– April 24, 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.

– July 5, 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.

– July 24, 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.

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

– August 27, 2012: Supreme Court extends the 2G Auction Deadline from August 31, 2012 to Jan 11, 2013. The court also allows service providers whose licenses were cancelled to continue operations till 18th January 2013, extending the earlier deadline of 7th September 2012.

– November 5, 2012: Tata Teleservices and Videocon Telecommunications withdraw its respective bids for CDMA Spectrum, leaving no qualified bidders for the CDMA spectrum in the 2G spectrum auctions.

– November 15, 2012: The 2G auction concludes in just two days and the government ended up raising just Rs 9,407 crore with only five participants, of which only two were among those whose licenses had been canceled. It was also indicated that the Government was able to sell only 42.37% of the total spectrum that was put up for the 2G auction.

– November 26, 2012: Tata Teleservices (TTSL) announces shutdown of its operations in Jammu and Kashmir, North-East and the Assam regions from January 18, 2013.

– December 10, 2012: Sistema Shyam Teleservices (MTS India) sets a deadline to the Indian government to formulate a strategy to resolve its 2G license cancellation issue in the country. The company told Medianama that this was to ensure protection of over USD 3.2 billion investments made in Sistema Shyam Teleservices Ltd.

– December 10, 2012: Empowered group of ministers (EGoM) lowers the reserve price by 30% for the Delhi, Mumbai, Karnataka and Rajasthan circles in 1800 MHz band after these circles didn’t attract any bidders in the 2G auction due to high pricing. Following this reduction, the government had set a new reserve price of Rs 12,000 crore for a block of 5 MHz of spectrum in the 1800 MHz band on a pan-India basis.

– December 18, 2012: Telecom Regulatory Authority of India (TRAI) directs Tata Teleservices, Unitech Wireless, Videocon Telecommunications and Sistema Shyam Teleservices (SSTL) to inform the date of discontinuation of its services to all its subscribers in circles where the telcos has lost licenses to operate due to the Supreme Court Judgement.

– December 21, 2012: Reports suggested that the Department of Telecom is planning to auction about 24 blocks of spectrum in the next auction round, which includes 12 blocks of 1.25 MHz in the 1800 MHz spectrum band and 12 blocks of 1.25 MHz in the 900 MHz spectrum band. Telecom minister Kapil Sibal stated that the auction in the 1800MHz band and the 900MHz band will be held simultaneously.

– January 15, 2013: Supreme Court had allowed telecom operators whose licenses were cancelled following the Court’s judgement in the 2G scam case, to continue operations till February 4, 2013 from the previous deadline of January 18, 2013. The court had apparently sought details on the reserve price being set for the March auction and fixed February 4, 2013 as the next date of hearing for the case.

– January 18, 2013: Union Cabinet had approved a 50% Reduction in 2G reserve prices for CDMA spectrum.

– January 24, 2013: DoT had issued guidelines for 2G Spectrum Auction in March 2013.

– February 19, 2013: Uninor had shut its operations in Mumbai following a Supreme Court order in February 2013, which directed all operators who did not win spectrum in the November auctions to close down services immediately.

– Feb 21, 2013: Bharti Airtel and Vodafone India had approached the Delhi High Court to challenge the government’s plan to auction the 900MHz spectrum band, while Sistema Shyam (MTS India) had officially announced that it will be participate in the forthcoming spectrum action in March. DoT had also announced (pdf) that it will be conducting a separate round of auctions for licenses in the 1800MHz spectrum that freed up due to the Supreme Court order in February and were not included in the March spectrum auction.

– Feb 22, 2013: MTS India was winding down its operations in 10 of 22 circles, including Assam, Andhra Pradesh, Bihar, Himachal Pradesh, Haryana, Jammu & Kashmir, Madhya Pradesh, North East, Orissa and Punjab.

– March 4, 2013: Sistema Shyam was the only applicant for India’s March 2013 spectrum auctions in the 800MHz band. There were no applications for spectrum in the 1800 and 900 MHz band.

– March 12, 2013: Sistema Shyam had secured spectrum in eight telecom circles in the 800 MHz band for Rs 3,639 crore. The telco had previously applied for licenses in 11 circles but it decided not to bid in Mumbai, Maharashtra and UP East circles during the auction. Following the auction, Sistema Shyam mentioned that it would immediately initiate the process of informing its subscribers in these three circles to port out to other telecom operators of their choice.

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