The Department of Telecommunications (DoT) has issued guidelines for the second round of 2G spectrum auction. This time, it hopes to garner Rs 450 billion for the exchequer.
In the auction slated for March 2013 (no firm date has, however, been announced yet), DoT will offer unsold GSM spectrum in the 1800 MHz band. It will also offer airwaves in the 900 MHz band (which is currently held by operators but will come up for renewal from 2014 onwards) and the 800 MHz band. The spectrum won in this auction will be valid for 20 years.
In terms of pricing, the government has been particularly careful in light of its November 2012 experience in selling 2G spectrum, which turned out to be a damp squib. Industry experts blamed the high reserve price (Rs 140 billion for 5 MHz of pan-Indian spectrum in the 1800 MHz band) for the tepid response. The government received bids for only 98 of the 176 spectrum blocks put on sale, earning a mere Rs 94.07 billion against the expected Rs 400 billion. The reserve price for spectrum in the 800 MHz band (used to offer CDMA services) was even higher. At Rs 182 billion for 5 MHz of pan-Indian spectrum, it was viewed as too steep by operators, who declined to participate in the auction.
To attract bidders this time, the government has decided to reduce the base price for spectrum in the 1800 MHz band by 30 per cent and for the 800 MHz band by 50 per cent. Now, 5 MHz of pan-Indian spectrum in the 800 MHz band will cost Rs 91 billion.
DoT, in its Guidelines for the Auction and Allocation of Spectrum in the 1800 MHz, 900 MHz and 800 MHz bands, notes that the objectives of the auction are to obtain a market-determined price for spectrum through a transparent process, and to ensure efficient spectrum use. The objective is also to avoid hoarding, encourage competition, promote service roll-out and maximise the revenue proceeds from the auction within the set parameters. According to the guidelines, the overall cap on spectrum in each service area will be 25 per cent of the spectrum put on auction in all the bands.
While e-auctions for the 1800 MHz and 900 MHz bands will be conducted simultaneously in multiple rounds, the auction for 800 MHz spectrum will be conducted for 21 circles separately.
The auction in the 1800 MHz band will be conducted for the Delhi, Mumbai, Karnataka and Rajasthan circles. The block size will be 1.25 MHz (paired). The base price for each block in Delhi and Mumbai has been fixed at Rs 4.85 billion and Rs 4.74 billion respectively. In the Karnataka and Rajasthan circles, eight blocks will auctioned at a base price of Rs 2.31 billion and Rs 4.69 billion each, respectively. There is a provision for providing three blocks of additional spectrum in case a demand arises for the same.
In Rajasthan, however, spectrum is not available in 11 districts ? Bikaner, Barmer, Bharatpur, Dausa, Ganganagar, Hanumangarh, Jodhpur, Jaipur, Jaisalmer, Jalore and Sirohi. According to DoT, although bids will be sought in the entire licensed service area, the bid amount will be collected only for the spectrum available/allotted. The balance amount will be collected as and when spectrum is made available in the districts.
In the 900 MHz band, the spectrum block size to be auctioned will be 1.25 MHz (paired). The auction will be conducted for the Delhi, Kolkata and Mumbai circles. Twelve spectrum blocks will be auctioned in Delhi and Mumbai while 10 spectrum blocks will be auctioned in Kolkata. The reserve price for spectrum has been fixed at Rs 9.7 billion in Delhi, Rs 9.49 billion in Mumbai and Rs 2.27 billion in Kolkata.
For spectrum sale in the 800 MHz band, the block size is again 1.25 MHz (paired) and the auction will be held in 21 circles (except Rajasthan). In Andhra Pradesh and Punjab, two blocks each of 2.5 MHz of spectrum will be auctioned while in the rest of the circles 3.75 MHz of spectrum will be auctioned (three spectrum blocks each). The reserve price has been set at Rs 1.86 billion in Andhra Pradesh, Rs 56.4 million in Assam, Rs 276.3 million in Bihar and Rs 4.50 billion in Delhi.
In addition to the three blocks of spectrum being auctioned, DoT has made provision for auctioning an additional block of 1.25 MHz if the demand arises. However, the top-up spectrum block is not available in the Delhi, Kolkata, Maharashtra and Mumbai circles for now. In the Andhra Pradesh and Punjab circles, where two spectrum blocks will be put on sale, no top-up block will be available.
The guidelines also note that telecom companies winning spectrum in the auction will be allowed to use airwaves for any technology within the scope of their licences. Existing players, however, will have to get their entire spectrum holding converted to liberalised spectrum to remove restrictions on the use of technology.
In terms of spectrum usage charge, the guidelines mandate that in addition to the spectrum auction price, a percentage of the adjusted gross revenue will be payable from time to time as per rates notified by the government.
DoT will also allow spectrum sharing. According to the guidelines, operators whose entire spectrum holding in a particular band is liberalised will be permitted to share spectrum without any additional one-time spectrum charge. Besides, mergers and acquisitions will be permitted according to the guidelines on the subject issued by DoT from time to time. In all, the guidelines are a step forward and will put the 2G spectrum auction on the fast track.
