Trai recommends sale of airwaves of over Rs 5 trn for 5G auction

download (7).jpgSource: Business Standard, Aug 02, 2018

New Delhi: Signalling a quantum leap in mobile technology, the Telecom Regulatory Authority of India (Trai) on Wednesday gave its recommendations for the auction of eight bands, including the fifth generation (5G) ultra high speed telephony. 5G auction, a first for India, is expected to be a catalyst for internet of things (IoT) innovations that would speed up machine learning and artificial intelligence. Airwaves worth around Rs 5.06 trillion will be on offer for telecom operators in the next round of auction.

If accepted and implemented by the government, this would mean the largest spectrum auction in terms of amount with over 7,000 Mhz going up for sale across eight bands. This would range from the premium 700 Mhz to 3,300-3,600 Mhz. In terms of value, the previous auction in 2016 was at a slightly higher level with airwaves amounting to Rs 5.63 trillion up on sale. The cost of 700 Mhz airwaves alone was Rs 4 trillion. However, the government could sell airwaves worth around Rs 657 billion only, as telcos decided to ignore the high-end 700 MHz band completely.

The timing of the auction will be decided by the Department of Telecommunications (DoT) after gauging the interest of the industry, which is already divided on the subject of 5G auction. The telecom industry has been in the midst of financial stress, resulting in significant consolidation in the sector. Despite their falling revenues and profitability, several telcos are already getting into partnerships for 5G pilot runs to enable a smooth rollout in sync with global players. The NDA government too has been upbeat about 5G, expecting its Digital India campaign to get a boost.

In the last auction, around 60 per cent spectrum remained unsold. Also, much of the airwave acquired by telecom operators at that point is yet to be deployed.

In what is being seen as a relief to the industry, Trai has suggested that the reserve price of the 700 MHz band should be double that of the 1,800 MHz spectrum band. This translates into a reserve price of Rs 65.68 billion per Mhz for the 700 MHz band, about 42 per cent lower than the last auction in 2016, when the pan-Indian reserve price of the band was Rs 114.85 billion.

In another step to ease the industry pain, the regulator has recommended a price reduction in circles where spectrum remained unsold in the 2016 auction.As for the 1,800 MHz band, the regulator has proposed a base price of Rs 32.85 billion on pan Indian basis.

This is the first time that Trai has recommended a reserve price for the 3,300-3,600 Mhz bands, used for 5G. This will be equal to 30 per cent of the reserve price of the 1800 MHz FDD band, Trai said. It has suggested that spectrum in these bands should be put up for auction in the block size of 20 MHz.

A Trai official said more spectrum in 900 Mhz will be available by December; that too would be auctioned. On 5G, he said the new bands would be identified soon by the DoT. The expectation is that around 50 per cent of the airwaves put on sale could possibly be sold through this auction. “We have put the entire available spectrum on sale. It is up to the operators to pick and choose,” the official said.

Reacting to the proposals, industry body COAI said, “We are glad that the government has decided to bring down the price of spectrum, especially for the 700 MHz band. It is, however, important to note that considering the current financial stress the industry is going through, lowering the spectrum prices alone doesn’t fix anything. Until and unless the spectrum usage charges, licence fees and other levies are lowered as well, the industry may not be able to cope with the requirements for state-of-the-art infrastructure needed for new technologies and early roll-out of 5G.”

Proposing the rules for the auction, Trai has said that base price for bidding should be higher of the two figures – 80 per cent of the average valuation of spectrum band in the licensed service area or the price realised in the October 2016 auction.

According to the regulator, most stakeholders are of the view that at present the industry is going through a phase of substantial consolidation, and therefore it’s important to allow the market to settle down. “Some stakeholders are of the view that the spectrum auction should be held in 2019 when 5G technology is likely to be available for commercial launch in India. On the other hand, one stakeholder suggested that for explosion of 4G services and advent of 5G, more spectrum is required and auction of spectrum should not be delayed,” Trai added.

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