EGoM clears 10-MHz spectrum auction, puts off decision on pricing

An empowered group of ministers headed by Finance Minister Pranab Mukherjee on Tuesday cleared the auction of a minimum of 10 MHz of 2G spectrum but put off a decision on the contentious issue of determining the reserve price for spectrum auction.

The EGoM decided to auction a minimum of eight blocks in all service areas after reserving spectrum for refarming against the allocation of 900 MHz for incumbent operators whose licences will expire during 2014-2016.

It also agreed a provision be made for spectrum in another three blocks of 1.25 MHz each to meet the requirements of new operators.

That would make the total spectrum on the block 13.75 MHz.

The regulator had initially suggested only five MHz of spectrum be auctioned. However, after the department of telecommunications reference, sector regulator Trai agreed to allow the auction of 10 MHz, subject to availability in particular circles.

The Telecom Commission endorsed that view.

Based on Trai data, only 12 of the 22 circles in the country would have 10-MHz spectrum available after refarming needs are taken care of.

Key circles where spectrum up to 10 MHz is not available include Delhi, Mumbai, Gujarat and Punjab.

Additional 55-MHz spectrum vacated by the defence forces could be crucial in making the auction of 10 MHz possible, analysts say.

The Telecom Commission has asked the DoT to step up efforts for the vacation of spectrum by defence forces in the 1,800-MHz band to ensure availability in all circles.

A senior official present at the EGoM meeting said, "The EGoM decided to clear the auction of 10 MHz of spectrum.

However,

no decision was taken on the reserve price on Tuesday and a meeting will be held soon to decide on this."

He said the Trai did not make any presentation on the likely circle-wise impact of the base price on the costs of operators as asked by the DoT.

The impact analysis is expected to be completed in a few days.

Officials say the next EGoM meeting would be around June 20-22.

After the meeting, Communications Minister Kapil Sibal said, "Some decisions have been made. You will come to know by and by."

COAI, the GSM operators' association, expressed disappointment over Tuesday's decision.

"We have been asking the government to auction all the available spectrum as the auction of only 10 MHz will create artificial scarcity and increase prices," it said.

The Telecom Commission in its note to the EGoM had given two options to the EGoM on the reserve price: one recommended by the Trai, at Rs 3,622 crore (Rs 36.22 billion) per MHz, or Rs 4,245 crore (Rs 42.45 billion) as suggested by a DoT committee. No decision on that was taken.

The commission had last month put the onus of fixing the base price for the auction of 1,800-MHz spectrum on the EGoM. The Trai, under

J S Sarma (who has retired) as chairman, had conducted a study on the tariff impact of the spectrum base price. It came to four to six paisa per minute.

Telecom companies have attacked the regulator's recommendation of the base price at Rs 3,622 crore (Rs 36.22 billion) per MHz.

That, GSM operators said, would lead to an average increase in tariffs of 26 paisa per minute and as high as 90 paisa per minute in the metros.

The EGoM also rejected a proposal by the regulator for a deferred payment scheme at the auction.