Though the Telecom Commission has done well to, by and large, accept Trai’s recommendations on lowering the base price for the forthcoming spectrum auctions, the chances of these doing well are low unless a few more steps are taken—industry wants a certain type of spectrum but not enough of that is on offer.
In a very broad sense, you can divide telecom into ‘voice’ and ‘data’ and, again very broadly, you can categorise spectrum in the same manner. So, the 1800 MHz frequency band is broadly ‘voice’ spectrum, the 2100 MHz frequency is largely ‘data’ and the 900 MHz one can effectively be used for both ‘voice’ and ‘data’. You can, of course, use even 1800 MHz spectrum for data, and some firms will bid for this spectrum primarily to do ‘data’, but there are some complications. For one, there isn’t that much of an ecosystem—most affordable smartphones are geared for 3G and work on the 2100 MHz frequency, not 1800 MHz—which means you could have a repeat of the CDMA fiasco years ago when, though the technology was good, there simply weren’t enough mobile models available for customers. Two, 1800 MHz spectrum is fragmented, not giving telcos the 5 MHz contiguous slot they need for data operations.
Given that (see chart 1) the ‘voice’ market is largely saturated, and low-paying at that, telcos are unlikely to pay much for purely ‘voice’ spectrum. Growth in subscriber minutes has levelled off from 54% in FY09 to 9% now; just a few days ago, RCom announced it had cut off 10 million subscribers. Subscriber growth for ‘data’, on the other hand, is powering ahead. For Bharti Airtel, ‘data’ subscribers have risen from 35.8 million in September 2011 to 43.5 million in September 2012 and to 50.6 million in September 2013, their average data usage has shot up from 107 MB to 187 MB and 231 MB in the same period. In terms of average revenues per user (ARPU), this has risen from R44 to R55 and R70 in the same period—in just the last four quarters, the share of ‘data’ as a proportion of mobile revenues is up from 4.9% to 9.2%.
To that extent, telcos will bid the most for ‘data’ spectrum and the least for ‘voice’ spectrum—that is, the highest bids will come in for 900 MHz and 2100 MHz spectrum and the least for the 1800 MHz spectrum which, while it can