Trai proposes sharp cut in spectrum auction floor price

With successive rounds of spectrum auctions finding few takers because of high reserve prices, the Telecom Regulatory Authority of India (Trai) has recommended a sharp 60 to 80 per cent cut in the floor price of mobile phone airwaves for an upcoming auction.

The telecom regulator suggested a pan-India reserve price of Rs 14.96 billion per MHz in the 1800 band, down from the base price of Rs 36.40 billion in the previous auction.

In the 900 MHz band, which is also used by GSM players, it recommended a reserve price of Rs 2.88 billion per MHz for Delhi, Rs 2.62 billion for Mumbai and Rs 1 billion for Kolkata.

These rates are about 80 per cent lower than the previous reserve price.

Most telecom firms had stayed away from bidding in the previous two auctions, saying the prices were high.

Telecom Minister Kapil Sibal said the recommendations are reasonable and in recognition of market realities. "Not only will the government get its revenue but the market will also be able to purchase spectrum at reasonable prices so that the long-term impact on the market and on the telecom sector is positive," he said.

Trai, whose recommendations will now be considered by the government, said spectrum trading should be permitted and there should be no reservation of spectrum for renewal of licenses. It said all bidders should be treated alike and no priority should be accorded to licensees seeking renewal in the bidding process.

Also, spectrum usage charges for all airwaves allocated through auctions should be at a flat rate from April 1, 2014.

Asked if the reserve price was too high last time, Trai Chairman Rahul Khullar said: "Yes...please understand the approach has completely changed from the previous pricing regime."

Trai said spectrum in the 1800 MHz should be bid out in blocks of 2x200 kHz and existing licensees be asked to bid for a minimum of three blocks. New entrants, it said, must bid for a minimum of 25 blocks of 2x200 kHz each. For 900 MHz band, it said the block size should be 2x1 MHz, with the minimum bid set at five blocks.