The Telecom Commission (highest decision making body of the Dept of Telecom) has recommended a 15% increase in the reserve price of spectrum on a pan-India basis to Rs 17.5bn/Mhz. The Telecom Commission has Purportedly recommended as follows,
- Increased reserve price of 1800Mhz spectrum for eight larger circles (Metro & Category A) by 25%. The reserve price of remaining 14 circles remains unchanged and the average pan-India increase is 15%.
- Increased reserve price of 900Mhz spectrum in 3 Metros (Mumbai, Delhi and Kolkata) by 25%. These new prices in the 900 Mhz band will be ~50% lower than Mar-13 auction prices.
- Decided to conduct 800Mhz spectrum auction. Will ask TRAI (regulator) to recommend reserve price. This puts to rest the much needed EGSM band for Date Services for now.
- Approved the M&A policy, allowing mergers with a combined market share of up to 50% (compared to 35% currently).
- Deferred the decision on the uniform spectrum usage charge (at 3%) suggested by TRAI. The matter would be studied along with the finance ministry.
What will be the Outcome of this Move By Telecom Commission ?
Expect a Muted demand for 1800 in most large circles (metros and A category), slightly better in the smaller ones. Incumbents led by Airtel and Vodafone will look at buying their renewal 900 band spectrum in Delhi, Mumbai and Kolkata. 900 is better spectrum indeed but only at the right price. Expect muted participation in the 800 band auctions unless the Government allows a new entrant to buy a 5 MHz block.
In our opinion, Reserve prices set for a well-conducted ascending price auction can and should never be termed ‘low’; it can, of course, be termed high if one believes that a reasonable business case cannot be built on such spectrum cost levels. we emphasize that this event is just a step in a long series of steps (and mis-steps) towards determining the base market-determined pricing of spectrum in various bands in various circles. We are in the middle of discovering the quantum of increase in input (spectrum) costs for the industry and this discovery process would be an outcome of a series of action-reaction moves from the Government and the industry.