Trai pegs 800MHz base price 48% above previous auction price

The Telecom regulatory Authority of India (Trai) on Saturday recommended the reserve price for 800MHz spectrum at Rs 2,685 crore (Rs 26.85 billion) for one MHz of pan-Indian airwaves. The band is currently used for CDMA services in the country. The regulator has kept the price 48 per cent higher than the base price for the previous auction of the band conducted in March 2013. But it has kept the base price at 80 per cent of the average valuation.

The industry, which had asked the price to be kept at 65 per cent of that of the GSM bands, is upset with the regulator’s suggestion. “This is irrational. The regulator has just considered the theory. There is no practical sense amid the current state of the industry. At this price, the auction of 800MHz will again fail to attract any bidder,” said Ashok Sud, secretary general of the Association of Unified Telecom Service Providers of India (Auspi), the apex CDMA body.

Auspi had earlier asked Trai to keep the base price at 65 per cent of that in the 1,800MHz band. On the other hand, Sistema Shyam Teleservices, which was the lone bidder in the March auction and had acquired radiowaves to operate in eight circles for Rs 3,639 crore, had said the reserve price should be 65 per cent of that in the 900MHz band.

In the last auction of the 800MHz band, the government had kept the base price about 33 per cent lower than that in the 1800MHz band. The Trai suggested base price for 800MHz spectrum is 52 per cent higher than the 1,800MHz reserve price for the auction earlier this month.

Trai has kept the reserve price for the 800MHz band in the Delhi and Mumbai circles higher that the base price for the 900MHz band auctioned earlier this month. The price is 25 per cent higher in Delhi and 8 per cent in Mumbai.

Trai Chairman Rahul Khullar had, in an interview with Business Standard in October last year, said it would be wrong to sell 800MHz spectrum for a fraction of what could be realised.

In its recommendation, Trai has said it has taken into account the future potential of liberalised 800MHz spectrum, which is more efficient and can be used for providing long-term evolution (LTE) services.

“Trai has maintained a balance to arrive at the reserve price. Allocating all available spectrum for auction, recognising the need for contiguous spectrum and not restraining existing spectrum holders in any way are positives for the sector. The reserve price at Rs 2,685 crore per MHz, based on the recent auction, and the long-term potential of the 800MHz band for HSPA and LTE services may appear to be on the higher side from the current Indian market perspective,” said Jaideep Ghosh, partner, KPMG India. He believes the auction may see a tepid response unless a GSM operator decides to pick up efficient spectrum for LTE.

The regulator has also suggested that the entire CDMA spectrum held by MTNL be put up for auction as it is under-utilised. It has also said that the government should take back the CDMA spectrum held by BSNL for auction except one block of frequency in Jammu & Kashmir, Assam and the North-East.

According to Trai’s recommendation, the auction should be conducted in blocks of 1.25MHz and it should be mandatory for new entrants to win at least 5MHz of spectrum in contiguous blocks.