The Telecom Regulatory Authority of India – TRAI hosted an Open House discussion on valuation and reserve price of the upcoming auction of 2100MHz spectrum band. This event was part of TRAI’s consultation process before finalizing its recommendation to the Department of Telecommunications (DoT) over the next few weeks.
2100 MHz Band Spectrum Related Discussion
Availability of spectrum in the 2100MHz band would depend on how much spectrum is finally vacated by the defence ministry. Media reports have indicated that Defence could vacate 5-15MHz of spectrum.
House was of the view that in case only one block of 5MHz is available in a circle, then only a NEW operator should be allowed to bid for it. If more than one block is available, an existing 3G operator may also bid for incremental spectrum in that circle.
TRAI agreed with operators that the time gap between auctions and final allocation of spectrum to operators has to be shorter. While the regulator has little control in this regard, it would highlight the same in its recommendation to the DoT.
2100 Mhz Spectrum Reserve Price
Operators argued that 2010 auctions were conducted under different market conditions, it will not be appropriate to use the same as benchmark for reserve price for 2015 auction. Operators suggested that valuation of the 2100MHz band could be based on: i) Technical efficiency factor (0.83x of 1800MHz price), ii) Producer Surplus approach, and iii) average of the value derived from these two methods. Given that the proposed auction is lined up soon (Feb-2015), technical efficiency factor could be the preferred mode to determine valuation and thereby the reserve price.
While TRAI is yet to formalize its view, rollout obligations may be considered for each spectrum band as the licenses are being auctioned separately. Operators had a mixed view on this issue with a few preferring rollout norms for telecom services in general not specific to a spectrum band. TRAI has already suggested to the DoT to simultaneously conduct auctions of 800MHz/ 900MHz/ 1800MHz/ 2100MHz bands to facilitate operators to take a more informed decision based on market activity.
In the backdrop of pro development reforms by the Narendra Modi led Government of India, we expect a simpler, transparent and fair auction process. A chance to own 3G spectrum in case of limited availability and simultaneous auctions, are likely to be in favour of operators. The final TRAI recommendations on valuation and reserve price of 2100MHz spectrum are expected in a fortnight and then DoT in consultation with Telecom Commission is likely to arrive at a decision. Meanwhile, Reliance Jio Infocomm’s absence in the consultation process indicates it is likely to skip the 2100MHz auction.