In July 2013, the DoT had sought TRAI’s recommendations on applicable reserve price for auction of spectrum in 1800 MHz, 800 MHz and 900 MHz bands. After considering the recommendations dated 9th September 2013, the Government has taken the following important policy decisions:
The entire available spectrum with the DoT to be put up for auction.
There will be no reservation of spectrum for the Renewal Licensees in 900 or 1800 MHz bands.
Spectrum trading should be permitted in the country. Initially, only outright transfer of spectrum should be permitted.
Spectrum usage charge (SUC) for spectrum acquired through current auction will be charged at 5% of Adjusted Gross Revenue. There is no change in the existing slab rate of Spectrum usage charges for the Licensees who do not acquire spectrum through current auction. In cases of combination of existing spectrum in 900 MHz and 1800 MHz bands and spectrum acquired through current auction, the weighted average will apply to both the spectrum held by the operator.
The pan-India reserve price of the spectrum was reduced by around 50% in the 1800 MHz band. Similarly, the reserve price for the 900 MHz band for the three metros, where it was being pit up for auction, was reduced by an average of more than 50%. Details of the reduction of the reserve price is given below:
The auctions were held in the February 2014. After two nearly failed or not so successful auctions, these auctions were very successful in terms of the quantum of spectrum sold and the revenue generated to the Government. The government raised Rs 612bn (around US$10bn) after 68 bidding rounds. During the 10-day auction, eight telecom companies competed for 20-year spectrum licences in the 1800Mhz band pan-India and the 900Mhz band in three key cities of Mumbai, Delhi and Kolkata. Eight companies participated in the auction: Bharti, Vodafone, Idea Cellular, Reliance Jio, Aircel, Tata Teleservices, Telewings (Uninor) and Reliance Communications.
The winning price for pan-India 1800Mhz spectrum was also 29% higher than the reserve price whereas prices in the 900 MHz band were 84% higher prices than the reserve price and 2.3 times the price of 1800Mhz spectrum in those circles.
India’s three large telcos Bharti Airtel, Vodafone and also Idea had compelling reason to bid aggressively. Many of their existing telecom licences will begin to expire starting November 2014, meaning that companies will have to surrender the spectrum they had received bundled with those licences. Bharti’s and Vodafone’s original licences in Delhi, Mumbai and Kolkata expire in November 2014, when they must return to the government spectrum they hold within the 900 MHz band. Since the government refused to reserve spectrum for them, they had little choice but to bid aggressively, or risk losing spectrum altogether, a disastrous outcome for their existing businesses. Other companies (e.g. Idea) whose licences are due to expire in near future, also obtained spectrum in the 1800 MHz band. There was one new entrant (Reliance Jio) in these bands, which was having only 2300 MHz spectrum in all the LSAs. It opted to acquire spectrum in 1800 MHz band in 14 LSAs in these auction.
Table
Cat
Circle
Quantum of spectrum put to auction in 1800 MHz band
