TRAI (Telecom Regulatory Authority of India) has released its recommendations for spectrum price for the 2016 auction.
Considering the recommendations of TRAI, the telecom ministry headed by Ravi Shankar Prasad will be trying to sell spectrum in the 700 Mhz, 800 Mhz, 900 Mhz, 1800 Mhz, 2100 Mhz, 2300 Mhz and 2500 Mhz bands.
TRAI Chairman RS Sharma earlier indicated that the forthcoming spectrum auction will be conducted in May / June 2016.
The base spectrum price per MHz for Delhi metro will be Rs 1595 crore for 700 MHz, Rs 848 crore for 800 MHz, Rs 399 crore for 1800 MHz, Rs 554 crore for 2100 MHz, Rs 143 crore for 2300 MHz and Rs 143 crore for 2500 MHz band, said TRAI.
TRAI said the base spectrum price per MHz for Karnataka (including Bangalore) will be Rs 740 crore for 700 MHz, Rs 303 crore for 800 MHz, Rs 558 crore for 900 MHz, Rs 185 crore for 1800 MHz, Rs 328 crore for 2100 MHz, Rs 98 crore for 2300 MHz and Rs 98 crore for 2500 MHz band.
Indian telecom industry stakeholders suggest that the timing of spectrum auction in 2016 should be carefully considered in order to ensure effective participation of all mobile operators in India. Currently mobile operators are busy rolling out services for the spectrum acquired in recent auctions and grappling with challenges of servicing debt and maintaining healthy profitability and cash flows.
700 MHz too costly?
Operators will burn their fingers if they are opting to buy LTE spectrum or 700 MHz spectrum. The basic price will be Rs 1595 crore for buying the 700 MHz spectrum in Delhi, Rs 1192 crore in Mumbai and Rs 596 crore in Kolkata. Several telecoms have already demanded that the spectrum auction for 700 Mhz should be put off for the time being.
For 700 Mhz Band, a pricing at four times the reserve price of 1800 Mhz is very ambitious, especially when the ecosystem is not fully developed, the potential benefits may need significant investment and lead time before being realized.
He suggests that reserve price should be moderated significantly or an alternate valuation model like revenue share (pay as you earn) based bidding should be explored.
Deloitte Haskins & Sells comments
The TRAI recommends higher of the two figures for reserve price:
80 percent (50 percent for Jammu Kashmir & north east) of the average valuation of spectrum band in the LSA or the price realized in the March 2015 auction / February 2014 auction.
The principle of higher of the two is predicated on simple mean of three valuation models: producer Surplus Model, Production function Model and Revenue Surplus Model which reflects the impact of usage of various spectrum bands on Capex, Opex and revenue of the operators, said Hemant Joshi, partner, Deloitte Haskins & Sells LLP.
He said the lack of adequate and contiguous spectrum is a historical fact and building a valuation model based on removal of these two constraints and therefore its benefits to the operators while it makes effective economic sense, maybe onerous as the lack of adequate and contiguous spectrum was beyond the control of the operators.
The ability of the telecom network operators to pay for spectrum will be constrained as realized rate for voice and data are not growing, in fact declining for last few quarters and the Balance Sheets are already overstretched and there is not adequate appetite for equity in the market.
Baburajan K
editor@telecomlead.com