The Telecom Regulatory Authority of India (TRAI) recommended a base price of almost INR115 billion ($1.7 billion) per megahertz for the 700MHz band in the next auction that will include a huge increase in spectrum offered across seven bands.
The base price for the highly efficient 700MHz airwaves is four times higher than the recommended reserve price for the earlier 1.8GHz spectrum auction and would mean the next selloff could generate as much as INR5.4 trillion ($81 billion), or nearly five times the amount raised last year, the Economic Times reported.
Last year’s auction of about 470MHz of spectrum in four bands generated a record INR1.1 trillion for the government.
The Times reported last week that the telecoms regulator is expected to sharply increase the amount of spectrum in the next auction, scheduled for May or June, raising expectations it will be the largest spectrum sale ever.
TRAI is examining how much spectrum should be auctioned and is considering allocating as much as 2,000MHz across the country’s 22 service areas.
Not that efficient
The extraordinarily high reserve price for the 700MHz band has been criticised by operators as being too high and potentially curbing interest in the auction since their debt levels are already extremely high. They have called for the 700MHz sale to be put off for two years until the 4G ecosystem has developed more.
The Times quoted Rajan Mathews, director general of the Cellular Operators Association of India (COAI), as saying: “Most serious players retained their 900MHz airwaves in key markets in the last auction and are in no hurry to pay the moon for 4G airwaves in the 700MHz band.”
Prashant Singhal, global telecom leader for Ernst & Young, told the Times that the 700MHz band is certainly capex efficient, which means it can be priced higher. “But at this reserve price, a block of 5MHz would be more than INR550 billion, which is way beyond the capex efficiency gains,” he said.
Credit Suisse warned in mid-January that the country’s three largest mobile operators, which accounted for 85 per cent of the spend in the last auction, will face increased financial pressure if the country’s planned spectrum auction goes ahead as scheduled this year.
Even if only 15-20 per cent of the spectrum is sold in the auction, operators will have to spend $6 billion to $14 billion, which would be a “financial burden that will lead to an immediate and further reduction in industry returns”, the brokerage said in a client note.
The base price for the 800MHz band is set 60 per cent higher than last year at INR58.19 billion per megahertz, while the 1.8GHz band is 31 per cent higher at INR28.73 billion.
The INR37.46 billion price for the 2.1GHz band is only marginally higher than in the last auction. The frequency, which is fragmented, didn’t sell well last year.
The 2.3GHz and 2.5GHz bands each have a base price of INR8.17 billion per megahertz.
TRAI’s recommendations have to be approved by the Department of Telecom and the Cabinet.
COAI said yesterday it will ask the regulator for its methodology used to determine the reserve prices, as it believes their may have been an error in calculating the 700MHz price, the Times reported.