Trai recommends auction of CDMA spectrum
Feb 22 2014 , New Delhi
Immediately after Telecom Regulatory Authority of India (TRAI) made its recommendations, telecom service providers again swung into action this weekend to formulate their strategies ahead of auction for 800 mhz spectrum.
As per industry estimates, spectrum should have been priced at 65 percent of what was quoted for 1800 mhz airwaves in the just concluded auctions last week.
If that were to be the benchmark, industry expects the government to set reserve price at Rs 5736 crore for 5 mhz all India spectrum. This is against the Trai recommended reserve price that works out to be Rs 13,425 crore.
Top CDMA player in 800 mhz spectrum, Russia’s Systema that has joint venture with Shyam telecom and offers services under MTS brand was unwilling to make a comment on the Trai reserve price.
When contacted by Financial Chronicle, Shyam Systema Teleservices Ltd (SSTL) spokesperson said, “given that the recommendations by TRAI specific to the reserve price of 800 Mhz spectrum have just come out, SSTL is in the process of going through all the details.”
In its representations, SSTL had earlier told both Trai and telecom department that price of 800 mhz spectrum should be 65 percent that of 1800 mhz.
TRAI has meanwhile asked nodal telecom department to put up entire available spectrum in 800 mhz band on auction while recommending 80 percent of average valuation as reserve price.
Interestingly enough, the Trai recommendations for CDMA spectrum have come close on that of 900 mhz and 1800 mhz bands that brought windfall to the government at over Rs 61,000 crore.
“The price is too high and I feel at this price there will be very few takers," Ashok Sud, secretary general, Association of Unified Telecom Service Providers of India (AUSPI), a lobby of CDMA players said.
In the March 2013 auction, government had set reserve price of about Rs.1,800 crore per mhz and Shyam Systema was the lone bidder in many circles. In many circles, the CDMA spectrum went unsolicited thereby forcing Trai to put off its recommendations for the airwaves in this band. At the last March pricing level, 5mhz would cost Rs 9000 crore.
Only following telecom department’s second request for reserve price, the Trai has made its recommendations on Saturday.
Jaideep Ghosh, telecom partner at KPMG said that Trai has attempted at a balancing act while the price may appear to be on higher side given the long term potential of 800 mhz band for HSPA and LTE services.
Hemant Joshi, telecom partner at Deloitte Haskins & Sells pointed out that reserve price was 45 percent more than that set in March 2013 for one mhz all India spectrum
Joshi maintained that the appetite for 800 mhz spectrum by big players may be limited given that they had heavily leveraged balance sheets. This is despite the fact that 800 mhz could be utilized for high-end value add services.
Several industry players have maintained that deployment of next generation technologies was possible and feasible only when contiguous and adequate spectrum was put on the table during auctions.
Trai has recommended that at least one chunk of contiguous 5 mhz spectrum (that is four carriers) should be carved out before the auction. “The carrier reassignment, if required, may be carried out amongst the existing TSPs (telecom services providers) in the 800 mhz band to make at least four contiguous carriers available,” the regulator said.
“Allocating all available spectrum for auction, recognising the need for contiguous spectrum and not restraining existing spectrum holders in any way are positive for the sector” Ghosh at KPMG said.
The regulator also recommended that spectrum in the 800 mhz band should be auctioned in a block size of 1.25 mhz. It also mentioned that a new telecom service provider (read Reliance Jio Infocomm) that does not have any spectrum holding in the 800 mhz band should bid for a minimum of four carriers.
However, existing players like Reliance Communication and Shyam Systema having some spectrum holding in the band were required to bid for at least one block of spectrum.
The regulator has asked government to take back the entire 800 mhz spectrum lying unused by state-run Mahanagar Telephone Nigam Limited (MTNL). In the case of Bharat Sanchar Nigam Ltd (BSNL) has asked government to allow retention of only one CDMA carrier in all the local service areas (LSA) except in Jammu and Kashmir, Assam and North-East LSAs, where it could have both the carriers.
Trai has asked telecom department to take back other carriers assigned to the BSNL in the 800 mhz band.
The regulator’s recommendations have come on the back of a consultation Paper (CP) it floated on December 30, 2013 on “Valuation and Reserve Price of Spectrum” raising specific issues for feedback from services providers.
After considering the comments received from the stakeholders and further analysis, Trai has come out with its recommendations for the reserve price for each of metros as well as pan-India price.