Telecom Commission recommends higher base price for spectrum auction

Telecom Commission, Wednesday recommended raising reserve price for auction of pan-India mobile phone spectrum by 15 percent over the one suggested by TRAI, and 25 percent higher in case of key circles like Delhi and Mumbai.

New Delhi: Telecom Commission, the highest decision making body of DoT, Wednesday recommended raising reserve price for auction of pan-India mobile phone spectrum by 15 percent over the one suggested by TRAI, and 25 percent higher in case of key circles like Delhi and Mumbai.

Sources said the inter-ministerial panel at its meeting here recommended to an Empowered Group of Ministers (EGoM) that reserve price for pan-India 1800 MHz spectrum be fixed 15 percent higher than the TRAI suggested rates.

The base price for 900 MHz be fixed 25 percent higher than what the TRAI had recommended, TC has said.

The rates recommended by TC are still lower than the reserve prices fixed for previous auction.

"We have taken a decision on the spectrum pricing for 1800 MHz and 900 MHz and also for merger and acquisitions. So we will now take this forward. The spectrum pricing has to now go to EGoM," Telecom Secretary M F Farooqui told reporters here.

The Department of Telecom (DoT) is likely to conduct the third round of spectrum auction by January and expects to garner a minimum revenue of about Rs 11,000 crore this fiscal.

The Telecom Commission has also approved the M&A policy, allowing mergers with a combined market share of up to 50 percent. This would replace the cap of 35 percent market share of the combined entity currently in vogue.

The acquiring company has to pay a market price of spectrum if it has been administratively assigned to the acquired company.

"The acquirer has to pay for spectrum which has come embedded with the licence to the acquired company," sources said.

The companies will also be allowed to retain two blocks of 3G spectrum in respective areas as a result of the merger.

The commission also decided to conduct the auction on 800 Mhz band.

The new base price per mega hertz (MHz) in 1800 band for Delhi has been suggested at Rs 218.90 crore, Mumbai - Rs 206.74 crore and Kolkata - Rs 73.13 crore, which is 25 percent higher than the base price recommended by TRAI.

The regulator had recommended Rs 175.12 crore for Delhi, Rs 165.39 crore for Mumbai and Rs 58.50 crore for Kolkata.

Similarly, for 900 Mhz band, the base price per MHz will be Rs 359.65 crore for Delhi, Rs 327.50 crore for Mumbai and Rs 125.27 crore for Kolkata.

TRAI had recommended Rs 287.72 crore for Delhi, Rs 262 crore for Mumbai and Rs 100.22 crore for Kolkata.

The Telecom Regulatory Authority of India (TRAI) had recommended up to 60 percent cut in the auction reserve price for spectrum in the 900 MHz band in Delhi, Mumbai and Kolkata circles. It had also suggested 37 percent cut in the reserve price for spectrum in the 1800 MHz band.

TC has decided that the value of spectrum, as recommended by TRAI, be set as the reserve price for the three metros and five category A circles in 1800 MHz band.

However, it approved the base price set by TRAI for the remaining 14 circles.

As a result, the base price for 1800 MHz will increase by about 25 percent in Delhi, Mumbai, Kolkata, Maharashtra, Andhra Pradesh, Gujarat, Tamil Nadu and Karnataka, whereas the pan-India price will be up by 15 percent.

Similarly, for 900 MHz band, the reserve price will increase by 25 percent for the three metros.

For 800 Mhz, used by CDMA operators, the Commission has decided to conduct the auction. It will now ask TRAI to give the reserve price for 800 Mhz spectrum.

"There is a technical view that 800 Mhz would not be available immediately for E-GSM and that was the view given by the committee constituted by DoT. So based on this, we have to now take further action... We would like to get the recommendations from TRAI (on price)," Farooqui said.

Stating that there was no demand for radiowaves in 800 Mhz band in the last auction, TRAI had recommended that the government should first fully explore the feasibility of adoption of the E-GSM band.

CDMA operator SSTL welcomed the Commission's decision to auction 800 Mhz band. It was the only company that had participated in the March auction for the 800 Mhz band radiowaves.

"Sistema Shyam Teleservices Ltd welcomes the decision of the Telecom Commission to auction the 800 Mhz spectrum band," SSTL spokesperson said.

Reacting to the TC's decision, GSM industry body COAI said it was "disappointed" with the new price.

"We would have liked if the commission could have retained the price recommended by TRAI. But even with the 15 percent increase in price, we expect good participation of operators in the auction," COAI Director General Rajan S Mathews told PTI.

The government has to conduct the third round of spectrum auction following the Supreme Court's directive. The apex court had cancelled 122 licences in February 2012 in the 2G spectrum allocation case.

Another set of auction for 900 Mhz has to be conducted as some of the radiowaves in this band are held by old telecom operators and their licences will start expiring from November 2014.

On the M&A guidelines cleared by the Telecom Commission, ICICI Securities Executive Director and head of corporate finance Ajay Saraf said: "Allowing mergers and acquisitions to happen under the 50 percent market share cap is a positive move as it allows quick consolidation option to large players.

"Post todays discussion, we expect the government to come out with proper M&A guidelines before the auctions process."