India is set to hold spectrum auctions in November following a speedy resolution of linked issues by the empowered group of ministers (EGoM) in its second meeting on Thursday. According to DoT sources, auctions for 3G, Broadband Wireless Access (BWA) and EV-DO spectrum will be held after a preparation of 90 days. The EGoM has decided to auction four 5X2 MHz slots of pan-India 3G spectrum at a reserve price of Rs 3,500 crore. TOI was first to report about the Rs 3,500 crore reserve price in its August 19 edition. It is additionally putting three 20 MHz slots of BWA spectrum at areserve price of Rs 1,750 crore and one 2X1.25 MHz slot of EVDO spectrum at a reserve price of Rs 875 crore on the block. “The EGoM has supported practically all the Telecom Commission’s recommendations of December,” DoT secretary Siddharth Behura told ToI.
Both MTNL and BSNL have already been allotted 3G spectrum and have launched services. However, these two public sector firms too, will eventually have to match the highest bid that emerges in the upcoming auctions. The spectrum auctions are critical as this year’s Union Budget targets a 6.8% fiscal deficit after accounting for Rs 30,000 crore of auction revenue. The reserve price chosen by the EGoM promises to safely net the government upwards of this budgeted figure.
The decision is also significant as it will permanently alter spectrum pricing, including for 2G, by moving from a government-controlled price to a market-determined one. In 2006, the Trai had recommended a reserve price of Rs 1,010 crore for 3G spectrum. This was later raised by the DoT to Rs 2,020 crore and subsequently doubled to Rs 4,040 crore by the finance ministry. The GoM has chosen a middle path by settling for a reserve price of Rs 3,500 crore.
The EGoM’s decision is important considering that industry association Auspi has been attempting to convince the government to increase the number of slots placed for auctions, thereby lowering its price by tinkering with the demand-supply equation. Auspi’s secretary general, S C Khanna was quick to accuse the government of spectrum hoarding by deciding to restrict the number of slots. “The reserve price is too high. They should have followed Trai’s recommendation of Rs 2,020 crore,” he said. It is expected that Auspi and its members will explore all its legal options to challenge this decision.
However, CEO & JMD Manoj Kohli of market leader Bharti Airtel said, “Bharti Airtel is looking forward to participating in the auctions”, he confirmed. According to senior DoT officials, the EGoM is also taking into consideration the Department of Space (DoS) arguments that the auction of spectrum in the S band should be restrained on account of the Defence and Railways critical mobile satellite network requirements and fear of interference between private WiMax players and secret inter-agency government communications. It is learnt that the approval for BWA spectrum has been given conditional to the assurance that it will not cause any interference with the Defence forces satellite network.
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