Spectrum price: DoT says EGoM may seek Trai opinion

New Delhi: The Department of Telecom (DoT) has placed two interesting options before an Empowered Group of Ministers (EGoM) which is to meet soon to decide on spectrum base price before the next round of auctions is announced.

It has said the EGoM could consider seeking a fresh opinion from sector regulator Trai on the price of spectrum or could, on its own, decide to revise the price downwards. Of course, the EGoM could well decide to keep the price of spectrum unchanged too.

The DoT has prepared an exhaustive note for the EGoM's consideration. AFP[/caption]

Not just price, the EGoM needs to consider two other important issues before the auction date is finalised: whether all the remaining spectrum in 800 mhz band (which is used for CDMA services) should be also put up for auction and whether auction for the 900 mhz band needs to be conducted together with the 1800 mhz auctions.

More from Business

The DoT has prepared an exhaustive note for the EGoM's consideration, raising these questions which need to be answered by the ministers. It has also indicated that based on past two rounds of auctions, it takes about 50 days to complete an auction - seeking a timeline for the fresh round.

Speaking to Firstpost last week, sources in DoT had said that auctions should happen sometime in July and that it was possible that the auction of 900 mhz band may not be done together with that of 1800 mhz band.

And in a letter to Telecom Minister Kapil Sibal earlier this month, Planning Commission Deputy Chairman Montek Singh Ahluwalia has made a strong pitch for reducing the base price of spectrum. Ahluwalia is a member of the EGoM also.

The success or indeed failure of the next round of spectrum may well depend on whether the government sees it fit to reduce prices of 1800 mhz spectrum further. It has, previously, been forced to slash prices in the four most lucrative circles of Delhi, Mumbai, Karnataka and Rajasthan by 30 percent because no telco placed bids in these circles in the first round of auctions.

And it had to halve the base price of the 800 mhz band because not a single bidder came forward in the first round. In the second round, which was held in March, only one bidder - Sistema Shyam Teleservices - palced any bids for the 800 mhz band.

As per the Trai recommendations on spectrum pricing, 800 mhz is 1.3 times the base price of 1800 mhz and the 900 mhz spectrumn comes for twice the 1800 mhz price. So if the EGoM were to reduce 180-00 mhz price again now, base price of the other two spectrum bands will get proportionately reduced.

Telcos has already indicated that they are not keen to participate in future auctions unless prices are reduced. This, when the incumbents need to get licences and spectrum in some circles where these are coming up for renewal in 2014.

So whatever decision the EGoM takes this time, it will have a huge impact on the future of the telecom sector in India.

In the DoT note quoted above, the department has said that 286.10 mhz of spectrum, released after licenses were quashed by a Supreme Court order, will be put up auction in the 1800 mhz band in the next round.