GSMA’s chief regulatory officer, John Giusti, has urged India to lower the auction reserve price for the 700MHz spectrum band to meet the government’s objective of increasing mobile broadband penetration.

“The GSMA urges the Indian government to reconsider the auction reserve prices to better reflect local market conditions, allow competition in the market to determine fair prices… and increase mobile broadband access for all,” he said in a statement.

The telecoms regulator in late January set a base price for the band at an eye-watering $1.7 billion per megahertz. India’s top four operators, however, have said since February they may avoid the 700MHz auction, given their stretched balance sheets and need to beef up their 4G networks with newcomer Reliance Jio soon to launch 4G nationwide.

“The reserve price for this much-needed spectrum are unrealistic in relation to the economics of the mobile industry,” Giusti argued.

He said if the Telecom Commission maintains the current reserve price, there is the risk of a failed auction or, at a minimum, serious limitations on investment capability in next-generation networks. “If the spectrum goes unsold, it would be extremely damaging not only for the Indian mobile industry, but also for the country’s economy overall.”

Impact on government target
With the 700MHz band included across the country’s 22 service areas, the government has estimated it could raise a staggering INR5.37 trillion ($80.5 billion) in the auction, scheduled for July.

But the Economic Times reported yesterday that the high reserve price is deterring bidders — specifically Bharti Airtel, Vodafone India, Idea Cellular and Reliance Communications — and could limit the amount generated in the auction to INR600 billion – INR700 billion.

Giusti noted that the total recommended reserve prices for the seven spectrum bands in the auction are almost double the cost of all spectrum investment to date in India. The amount equates to more than 20 times the annual free cash flow of the entire mobile industry in India.

“The government’s decision to reduce spectrum usage charges from 5 per cent to 3 per cent is a step in the right direction, but it will not do enough to offset such high spectrum prices,” he said.