Indian ministers increase spectrum slots for auction

The debates over India's spectrum auctions rage one. On Tuesday, a panel of ministers agreed to auction more than eight slots across the country, reversing a previous restriction, but still did not finalize the controversial issue of minimum price levels.

The panel decided to invite bidders for the auction, which will reallocate recently cancelled GSM licences, on August 6. The sale can only progress once the ministers make final rulings, particularly on reserve prices, but the panel is up against the clock now, as the Supreme Court has set a deadline of August 31. The Court ordered the cancellation of 122 2G licences, citing corruption in the original 2008 auction.

Some of those operators had not activated services, or have responded by pulling out of the market, but others, like Telenor, Idea Cellular and Sistema JSFC, badly need to reacquire their spectrum. They have been allowed to carry on offering their current services until September 7, but after that can only continue if they have new licences.

The decision to increase the amount of spectrum to be auctioned to more than eight slots of 1.25MHz in each of India's 22 service areas should ease concerns about there being too few allocations, although many argue that India's wireless space is overcrowded, especially as the major cellcos already operate 2G networks and are moving to 3G. Many analysts think the solution is to have more capacity, but fewer players - a result which may be achieved by the high prices which TRAI has proposed for the reauctioned frequencies.

Carriers are fiercely opposing the reserve prices, which are several times higher than in previous Indian auctions, and are also concerned about TRAI's proposals to force refarming of 900MHz and 1.8GHz 2G spectrum. The ministers this week supported the regulator's recommendation to take back 900MHz spectrum from existing operators, and replace this with 1.8GHz allocations. Bharti Airtel, Idea Cellular and Vodafone India have released the results of a study commissioned from research firm Analysys Mason, which says the refarming plans would lead to higher prices for end users.

The report estimates that the implementation of the refarming recommendations, which still require Cabinet approval, will require replacement of 286,590 existing 900MHz base stations with 1.8GHz equipment, in addition to deployment of an additional 171,954 new base stations in the 1.8GHz band to fill coverage gaps, as the higher frequency has shorter range. This will result in incremental capex of INR547.4bn and incremental annual opex of INR117.6bn, says the report, which could inflate 2G voice tariffs by as much as INR 0.64 per minute, significant in a country of such low ARPU and fierce price wars.

Analysys Mason said that the recommendations "lack the rigor and comprehensiveness" of regulatory impact assessment seen in other markets where refarming has been carried out. It is particularly concerned about the availability of sufficient spectrum to support existing voice traffic, along with new technologies such as 3G and LTE in future.