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The Lowdown: DoT’s Guidelines For 2G Spectrum Auction In January 2014

Department of Telecommunications (DoT) has released a notice inviting applicants for the 2G spectrum auction expected to take place in January 2014, where 403.2 megahertz (MHz) of spectrum in the 1800MHz band and 46MHz of spectrum in the 900MHz band will be put up on sale. You can download the notice here.

The auction is expected to start on January 23, 2014 and will be conducted simultaneously online as a single process. There will be a pre-bid conference on Friday (December 20, 2013) and Interested bidders can submit their applications by January 4, 2014. The final list of eligible bidders will be released on January 16, 2014. Times Internet Limited & e‐Procurement Technologies Limited will be auctioneers of this e-auction.

Payment Details: Bidders either have to pay full bid amount upfront or make use of the deferred payment option to pay 33% of the bid amount (in case of 1800MHz band) or 25% of the bid amount (in case of 900MHz band) within 10 calendar days of the auction close.

Last week, Union Cabinet had set a base price of Rs 1,765 crore per MHz for 1800MHz spectrum, which is about 26% lower than the previous auction. For 900MHz spectrum, it had approved a base price of Rs 360 crore per MHz for Delhi, Rs 328 crore for Mumbai and Rs 125 crore for Kolkata, which was about 53% lower than the previous auctions.

The government hopes to raise Rs 48,000 crore from these auctions if it is all sold at the approved reserve price, although note that both the previous 2G spectrum auctions have largely been unsuccessful. It failed to sell any spectrum in the 1800MHz band and 900MHz band in the March 2013 auctions and sold a little more than a third of the spectrum offered in November 2012 auctions.

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Spectrum available for licensing, with a validity of 20 years:

1800MHz band: Block sizes of 200 KHz (paired) are on sale in all 22 telecom circles. New entrants must bid a minimum of 25 blocks in 1800 MHZ band, amounting to 5MHz of spectrum while existing licensees should bid for a minimum of 3 blocks. The spectrum cap for each operator in 1800MHz band is 50% of spectrum allotted and put for auction in 1800MHz band.

1800MHz Auction 1

1800MHz Auction 2

1800MHz Auction 3

1800MHz Auction 4

900MHz band: Block sizes of 1MHz (paired) are on sale in three circles – Delhi, Mumbai and Kolkata. Each bidder must bid for a minimum of five blocks in 900 MHz band, amounting to 5MHz of spectrum.  The spectrum cap for each operator in 900MHz band is 50% of spectrum allotted and put for auction in 900MHz band.

900MHz Auction

Points to note:

– Existing licensees will be treated as ‘New Entrant’ in service areas for the frequency bands in which they currently do not hold spectrum.

– Bidders whose licenses will expire in 2014 and their spectrum will be put to auction will be treated as ‘New Entrants’.

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– There is a cap of 25% on the total spectrum assigned in each band with applicable paired band put together.

– The licenses being offered are technology neutral licenses. However, if bidders are deploying a technology besides GSM/CDMA/WCDMA, they should provide details of the proposed technology to be deployed within one month of obtaining the license.

-In case of a change of technology, while rolling out the networks for compliance of roll out obligations, information about the new technology should be given at least one year before any new technology Base Station site is offered for testing. Prior clearance will be required for technologies other than GSM, CDMA, WCDMA, LTE and WiMAX.

– New entrants should have a net worth of Rs 100 crore for each service area besides Jammu & Kashmir and North East areas where the net worth should be Rs 50 crore.

2G Spectrum Allocation Timeline

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

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– 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.

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– 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.

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– 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.

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– 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.

– September 10, 2013: TRAI recommended 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.

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December 5, 2013: Union Cabinet was expected to discuss 2G spectrum pricing for the January 2014 auctions.

December 9, 2013: Union Cabinet had set a base price of Rs 1,765 crore per MHz for 1800MHz spectrum, which is about 26% lower than the previous auction. For 900MHz spectrum, it had approved a base price of Rs 360 crore per MHz for Delhi, Rs 328 crore for Mumbai and Rs 125 crore for Kolkata, which was about 53% lower than the previous auctions.

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