Will Telcos BUY 700Mhz Spectrum at TRAI’s Recommended Auction Price ?

700MHz Spectrum AuctionTRAI has recommended auctioning 700 MHz spectrum (7 blocks of 5 MHz each) along with spectrum in other bands (800, 900, 1800, 2100, 2300, and 2500). TRAI has recommended auctioning all spectrum available with the DOT and some more. Recommended reserve price for 700 MHz spectrum is US$8.5 bn for a 5 MHz block across all 22 circles. Most Telecom Operators including Reliance Jio and Airtel have responded to defer the auction until ecosystem is developed for the same. TRAI has proposed a 4X 1800 reserve price for spectrum in the 700 MHz band. It has also proposed separate, more stringent rural roll-out obligations for this band.

TRAI has gone for a fresh valuation exercise for the purpose of recommending reserve prices for spectrum in the 800, 900, 1800 and 2100 spectrum bands. We note that spectrum in these bands was sold in the March 2015 auctions. TRAI’s rationale for a fresh valuation exercise is availability of fresh data points from the evolution of the data market since the March 2015 auction. We do not concur – bids made in the March 2015 auctions already
baked in operators’ expectations of data market evolution and we doubt if trends have changed materially since.

Other Key takeaways from TRAI’s recommendations
The entire available spectrum in 2100 MHz band, including spectrum taken back from STEL, should be put to auction.

TRAI has recommended that the administratively assigned spectrum to Aircel in Haryana and Madhya Pradesh, Tata in Himachal Pradesh and West Bengal and Quadrant in Punjab should be taken back as they have not met their rollout obligations.

The Authority recommends that DoT should carry out carrier re-assignment exercise in the 800 MHz band and harmonize the 1800MHz band before upcoming auctions. This is to ensure that contiguous blocks of spectrum are available for operators to rollout out LTE network and fetch appropriate market price.

Spectrum Holding Cap – The existing provision of a cap of 25% of the total spectrum assigned and 50% within a given band should be used to calculate spectrum caps.

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