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Cabinet approves India’s costliest telecom spectrum auctions

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The Union Cabinet approved telecom spectrum auctions in the 700MHz, 800MHz, 900MHz 1,800MHz, 2,100MHz, 2,300 MHz and 2,500 MHz bands, a move that could fetch the government Rs 5.6 lakh crore, reports Livemint. It will be India’s largest telecom spectrum auction.

The cabinet, however, did not specify a timeline for the auctions, but said it will happen after TRAI clarifies fixing of Spectrum Usage Charges (SUC). Earlier in January, the Telecom Regulatory Authority of India had recommended reserve prices of Rs 11,485 crore per MHz for pan India airwaves, including the 700 MHz spectrum, which is being auctioned for the first time. Spectrum auctions in 2015 fetched the government Rs 1.09 lakh crore from the sale of 418.05 MHz of spectrum.

SUC charges and relaxed payment for telcos: The cabinet asked DoT to check with TRAI to resolve the issue of fixing SUC, which was recommended at 3% by the telecom commission this month, according to Financial Express. In addition, the cabinet also approved an alternate payment structure that allows telcos to pay 25% of the bid amount upfront for all bands, and 50% upfront payment in case of 1,800 MHz, 2,100MHz, 2,300MHz and 2,500MHz bands. Rest of the bid amount can be paid after a 2-year moratorium period in 10-year installments. The alternate payment option was initially suggested by TRAI in April.

Spectrum harmonization: As a part of the spectrum harmonization process across all 3G and LTE bands, the DoT had written to Defence Ministry in April asking it to release 15 MHz of spectrum in the 2100MHz to put it up for upcoming auctions. Last year, the Union cabinet had given its nod for spectrum swapping between defence and telecom.

Concerns over the ‘exorbitant’ pricing

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In March, DoT expressed its skepticism over TRAI’s recommendation of setting the reserve price at Rs 11,485 crore per MHz for the 700 MHz spectrum, crucial for mobile broadband and 4G. It said that ‘certain questions’ have been raised regarding the logic behind setting such a high reserve price for spectrum. The reserve price for 700 MHz band was set at four times more than that of the 1,800 MHz band’s discovered auction price, DoT added.

After TRAI announced the base prices in January, brokerage firm Credit Suisse said in March that the government is likely to budget a $25 billion spectrum sale from the upcoming auctions in 2016, but might hurt telcos as the pricing for the crucial 700Mhz band is 25% higher than its earlier estimates.

Telcos also expressed concerns: Back in February, Airtel India CEO Gopal Vittal said that TRAI’s recommended reserve price for the 700 MHz band is very expensive and that they might not be able to afford to buy spectrum at this price. While last month, Telenor India criticized the Telecom Commission’s approval of the base price for the 700 MHz band and its decision to increase upfront payments to 50% from the earlier 10% proposed by the TRAI.

Also Read: Lowdown on Govt approved spectrum trading guidelines

Image Credit: Flickr user  Michael Dorausch under CC BY SA 2.0

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