New storm in India over 2G auction rules
Regulator hikes reserve price tenfold since cancelled 2008 auction, but wants to make 2G bands technology neutral
Published: 23 April, 2012
READ MORE: Spectrum | India | Regulator | GSM
The fall-out from India's 2G licensing fiasco continues, with regulator TRAI throwing oil on the flames with plans to set a reserve price which is 10 times higher than in the original auction, in 2008. It is also proposing opening the resale up to all-comers, even when operators have been forced to surrender them as a result of the cancellation of the 2008 licences.
The government ordered all 122 licences from the 2008 sale to be handed back, though it wants carriers with active services to continue operating those for now rather than worsen India's already urgent shortage of mobile capacity. The potential bidders were braced for higher prices this time around, since one reason for the reversal of the first process, and the disgrace of former telecoms minister A Raja, was a corrupt undervaluing of the spectrum.
However, the industry was shocked by the scale of the increase, as carriers struggle with the world's lowest ARPUs, and intense competition in some operating circles. A pan-Indian licence in the 1.8GHz band would cost INR36.22bn ($690m) if approved, and TRAI has recommended reserve prices of at least twice that figure, for the 800MHz and 900MHz bands - $1.36bn in the latter frequency. In the 2010 3G sale, the government set a base price of INR35bn for a pan-Indian 5MHz slot.
However, there will be some genuine new value attached to the spectrum, which will for the first time be technology neutral. This could allow winners to run 3G or even 4G technology in the bands in future (for an extra fee to liberalize them from GSM). Only a handful of Indian cellcos gained 3G spectrum in last year's auction and the margins in 2G services are tiny, so the freedom to deploy data-focused technologies without waiting for further mobile broadband spectrum sales would be welcome to some players.
The re-auction of the disputed 900MHz licences is proposed for the first half of 2013 and of 1.8GHz airwaves "as early as possible". TRAI also has further blocks of 1.8GHz and 2.1GHz spectrum to sell off, probably in the second half of next year. The latter will add new 3G capacity while the former is becoming a globally promising band to refarm for LTE.
Opening the auction to any bidders could see current operators of GSM services having to shut down their network and transfer their spectrum to another firm. Some of the 2008 winners were yet to turn on any networks while others - such as joint ventures of Norway's Telenor and Russia's Sistema - have shut down their operations since the cancellation of the licences, despite government pressure not to do so. Others are still in operation and hope to be able to hang onto their licences at the auction.
The Cellular Operators Association of India denounced the proposals as "arbitrary, regressive and inconsistent" and added: "Moreover, it will also affect the investors' already shaken sentiments as it will prove to be an impediment for operators to invest and expand services."
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