The Telecom Regulatory Authority of India (TRAI) has recommended (pdf) an increase in the reserve price for a pan-India license in the 800MHz band to Rs 2,685 crore per MHz, up 48% from Rs 1,820 crore per MHz reserve price fixed for the March 2013 auctions.

The organization says these recommendations were formulated after analyzing comments and counter comments received from various stakeholders for its consultation paper released in December 2013 and an open house discussion conducted with all stakeholders last month in New Delhi.

TRAI Recommends Taking Back CDMA Spectrum From BSNL & MTNL But Both Telcos Oppose It

TRAI has recommended that Department of Telecommunication (DoT) should take back around 50% of BSNL’s spectrum in the 800MHz band and the telco should be allowed to retain only a single block of spectrum in 800MHz band in all service areas except for Assam, North-East and Jammu and Kashmir where it is the only operator offering CDMA services. It has also recommended that DoT should take back the entire CDMA spectrum of MTNL in the country.

This is because TRAI believes the spectrum assigned to both the telcos has been underutilized. It points out the combined CDMA subscriber base of both the PSUs is only 2% of the total CDMA subscribers and the subscriber base of both the PSUs are continuously declining right now.

Both the telcos BSNL & MTNL however has opposed this proposal. A BSNL director has told The Economic Times that it has already invested Rs 600 crore in a countrywide CDMA network and if it is asked to return the spectrum, not only this investment will go waste, it will have to spend an additional Rs 250 crore – 300 crore for migrating the majority of its 10 million CDMA customers to “inferior frequencies”, thereby compromising the service quality.

MTNL has also ruled out returning its CDMA spectrum, since it wants to use it to either deploy LTE services or share it with other operators to generate revenue. Remember that MTNL had earlier surrendered its Broadband Wireless Access (BWA) spectrum in both the operational circles while BSNL had surrendered BWA spectrum in six of the twenty circles to improve their existing financial condition with the refund received from the government.

Other Recommendations

– The entire spectrum available with DoT should be put to auction and should be auctioned in a block size of 1.25MHz.

– At least one chunk of contiguous 5MHz spectrum block should be carved out before the auction. Reassignment may be carried amongst existing telcos in the 800MHz for this purpose.

– A new entrant must bid for a minimum 5MHz of spectrum in the 800MHz band and they should be allotted designated contiguous blocks only. Existing licensees should be allowed to bid for a minimum 1 block of spectrum.

– The reserve price for the forthcoming auction in 800MHz band should be fixed at 80% of the average valuation. The recommended reserve price for the forthcoming auctions are as follows:

TRAI 800MHz price (1)

TRAI 800MHz price (2)

Implications

With higher spectrum price, there are already indications that 800MHz auctions will witness lesser participation from telcos. The Association of Unified Telecom Service Providers of India (CDMA body) has expressed dismay saying that the pricing irrational amid the current industry state and the auctions will again fail to attract any bidder at this price.

Earlier, Sistema had said that the reserve price for 800 MHz band should be priced at 65% of the price of 1800 MHz spectrum, using the formula applied in the March 2013 auction. It had also mentioned a higher reserve price for CDMA spectrum is not justified since there is currently no mature device ecosystem to deliver LTE services, unlike the 1800MHz band where it exists.

Remember that Sistema which operates its telecom services in India as MTS India is probably the only telco which is focusing on the CDMA services in the country with both Tata Tele and RCOM largely shifting its focus to GSM services.

Sistema was the only participant in India’s March 2013 CDMA spectrum auctions, while there were no participants in the November 2012 CDMA spectrum auctions after Tata Tele and Videocon had withdrawn their respective bids prior to the auction.