India’s BSNL is reportedly looking for INR20 billion ($325 million) in compensation from the government to give up 1.2MHz of 900MHz spectrum for next year’s auction.

A BSNL executive told the Economic Times that the amount would be needed to cover higher investment in its network and would be a ‘pre-condition’ for it to give back the spectrum in 18 service areas, where its licences expire in 2015-16.

The Telecom Regulatory Authority of India (TRAI) has suggested taking the 1.2MHz from BSNL to boost the spectrum supply before the auction. The move would leave the state-owned firm with 5MHz. The executive told the Times it was feasible to provide coverage with the smaller amount, but it would need at least an additional 15,000 bases stations and to upgrade to its core network across the country.

In exchange for the 900MHz spectrum, TRAI has said it would assign BSNL 1.2MHz in the 1.8GHz band in three service areas where it holds less than 3.8MHz.

The Department of Telecom has said it will ask BSNL for its input like it did earlier this year when it requested the operator to relinquish 50 per cent of its spectrum in the 800MHz band, the Times said.

Many analysts see TRAI’s recommendation as a positive move for the industry, as it would free up frequency for 3G service, but they said it will likely take a long time to implement, with resistance from DoT and BSNL expected.

The government in April announced plans to auction airwaves in two frequency bands early in 2015. The 900MHz sale will be held because operators’ 20-year licences expire, while the 1.8GHz spectrum to be auctioned was unsold in February’s auction.

BSNL is the country’s fifth-largest mobile operator with a 9.5 per cent market share. It has 88 million connections but is steadily losing customers. The operator had 96 million mobile connections at the end of 2013.