3G spectrum will fetch Rs 1,500 cr; Trai makes recommendations

Spectrum for next generation mobile telecom services (3G) will be auctioned and will fetch at least Rs 1,500 crore in one-time acquisition fees and an additional annual spectrum charge of 1% of the gross revenues of telecom operators.

The Telecom Regulatory Authority of India (TRAI) on Wednesday made recommendations to this effect to the department of telecom (DoT). The department had, in a reference made to Trai in May, sought its views on allocation and pricing of spectrum, or frequency bands, for 3G services.

Trai says that its recommendations take care of the issues of affordability of 3G services to consumers, responsible and efficient use of spectrum, and aiding growth of the telecom sector, particularly in rural areas. It said the recommendations are also aimed at promoting competition among telecom players and providing a level playing field among technologies.

Broadly, Trai has recommended that available spectrum be allotted among telecom players for providing 3G services through a “prescribed auction procedure” detailed in its report. Under this, the base price for the acquisition of spectrum for 3G services will be Rs 80 crore for category ‘A’ telecom circles, including Delhi and Mumbai metro, Rs 40 crore for category ‘B’ circles, including Chennai and Kolkata metro, and Rs 15 crore for category ‘C’ cities and circles.

The spectrum for immediate allocation for 3G services, Trai says, should be in 450 MHz, 800 MHz and 2.1 GHz. Present estimates suggest 2 x 32.5 MHz of spectrum will be available in the next six to nine months for 3G services. Five blocks of 2 x 5 MHz in 2.1 GHz band, one block of 2 x 5 MHz in 450 MHz band and two blocks of 2 x 1.25 MHz in 800 MHz band are recommended to be auctioned. This would mean spectrum for 3G services can be availed of by five or even six telecom players in each circle. If there are more players, they will have to wait for availability of more spectrum in the future.

Bharti Airtel chairman Sunil Bharti Mittal has reacted negatively to the Trai recommendations. “The reserve price has been fixed way too high. It will be a serious hindrance in achieving the goal of deeper penetration of telecom services by having lower tariffs. We will appeal to DoT to substantially lower the threshold prices”, he said in a statement.

Reliance Communications, the country’s leading CDMA player, did not react immediately to the proposals, but Tata Teleservices, the country’s second largest CDMA company, was positive. “Trai’s recommendations are fair to all participants in the sector and are progressive in nature. We are happy that the regulator has maintained an evidently technology-neutral approach. The recommendation on pricing and auction of spectrum clearly establishes that spectrum is recognised as a scarce resource and must be utilised efficiently,” said Darryl Green, CEO of Tata Teleservices.

The telecom industry has been a divided house on the norms for spectrum allocation and pricing, with major players Bharti and Tatas pleading their varying points of view before the powers that be, including the Prime Minister. The Trai recommendations, according to industry sources, are an exercise in reconciling these opposing points of view. But clearly, the last word is yet to be said and industry players will now lobby with DoT to influence the final course of spectrum allocation and pricing.

Trai has not taken into account the 1900 MHz, 2.3 GHz, 2.5 GHz and 700 MHz bands for 3G and broadband wireless access services as they are not immediately available and there are technical issues, particularly in mixed band plan. Trai has emphasised that spectrum identified for 3G should be treated as a standalone allocation and not as an extension of earlier spectrum allocation for 2G services.