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Telecom regulator likely to consider reduction in spectrum base price
TT Correspondent |  |  27 Dec 2018

The telecom regulator is looking at ways to lower the base price at which bids will be sought for airwaves in future auctions, as it seeks to move away from its usual practice of mechanically hiking the starting price in every successive sale.

It will soon start a consultation process to arrive at a new methodology which may take into account the health of carriers, possibly addressing a long-standing demand of the industry reeling under high debt. This exercise will, however, have no impact on the next spectrum sale which is scheduled to take place in the second half of 2019, and for which the base price has already been announced. The last round of auctions took place in October 2016, and from next year, Telecom Regulatory Authority of India (Trai) is keen to make them an annual feature.

High base prices for spectrum at auctions, going back to 2010, have been a major contributory factor in the telcos running up debts of around Rs 7 lakh crore.

Caught in a brutally competitive environment, even India's larger older operators have struggled to generate enough cash to service loans and pay their annual airwaves fees. These issues have resulted in a bulk of the airwaves put up for auction going unsold in recent times.

"Certain service providers have raised concerns about the reserve price of spectrum in every subsequent auction being sat the discovered price of the last auction plus indexing. This means the price of spectrum keeps increasing, irrespective of whether the telecom industry can pay the price," a senior official at Trai told ET.

"When something is sold off for Rs 10, the circumstances could have been different. And the approach that now it should be at least worth Rs 15, is not correct. Also, among all methods, opting for the one yielding highest value is also not correct," the official said.

A second official said it was time to change this "monotonically increasing function. The base prices should not keep increasing all the time... this (auction methodology) needs to be reviewed in the light of changing technology and state of the industry," a second official said.

Trai's methodology has historically resulted in the spectrum prices in India being among the highest in the world. For example, price of the 600 MHz band sold in the US last year was around Rs 3,500 crore a unit, while the initial price of the 700 MHz band in India in 2016 was set at nearly Rs 11,500 a unit. No telco touched the band in the October 2016 sale. And more recently, Trai's proposed base price of Rs 492 crore per unit of 3500 MHz 5G spectrum is much higher than Rs 65 crore per unit at a recent 5G auction in Korea, which may limit participation in this band as well in the next sale, said analysts.

The official added that the new methodology should discover a price which has to be attractive enough for telcos to participate but not too low as well. "For this, we will need to keep the variables objective enough," the official said, but didn't elaborate.

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