‘Cheaper’ spectrum & easier M&As for telcos

Nov 07 2013, 01:27 IST
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The government is hoping to get Rs 11,000 crore from the spectrum auctions in FY14 (Reuters) The government is hoping to get Rs 11,000 crore from the spectrum auctions in FY14 (Reuters)
SummaryUniform SUC on anvil but panel wants 800 MHz auctioned

With the Telecom Commission on Wednesday deciding to broadly go along with the sector regulator’s recommendations on the reserve price — it has increased the rates by 18% for spectrum in the 1800 MHz and 25% for the 900 MHz bands — interest in the sector is set to dial up again.

While the industry was clearly “disappointed” with the “higher” prices, telcos agreed the auctions could see ‘good’ participation. The government is hoping to get Rs 11,000 crore from the spectrum auctions in FY14.

The TC also approved a liberal merger and acquisition policy enabling buyouts by larger telcos of mid-sized firms and paving the way for consolidation. A merged entity can have up to 50% market share in a circle and can retain up to 25% of the total spectrum assigned. The combined entity can hold up to 25 MHz of 2G spectrum and 10 MHz of 3G spectrum, allowing players to optimise their cost of operations.

The TC, however, did not endorse the 3% uniform spectrum usage charge (SUC) recommended by the Telecom Regulatory Authority of India for spectrum bought through auctions and a cap of 5% for that allotted administratively, although it has in principle accepted its relevance and significance. A decision is expected after discussions with the finance ministry. A uniform SUC holds the key to a successful auction planned by the government in January and also the future of M&As.

Moreover, the TC has stayed with the telecom bureaucracy’s insistence on auctioning 800 MHz spectrum and has decided to once again ask Trai for the reserve price to conduct auctions in this band. Whether Trai sticks to its view that the 800 MHz band must be ‘liberalised’ first so that it can even be used by GSM telcos and not just those that offer CDMA services remains to be seen.

In increasing the base price by 18% and 25%, the TC has basically converted the value of spectrum for each circle computed by Trai as the base price. Trai had kept the reserve price at 80% of the value. The prices endorsed by the TC is around 50% lower than prices fixed during March auctions as against a 60% cut recommended by Trai.

While most of the policy issues troubling the sector seem to have been resolved, there is still ambiguity on the proposal for a spectrum swap between the telecom department and the armed forces to free

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