Spectrum Sale Faces Delay
Telecom ministry relooking at details; defence ministry yet to clear spectrum
Initially scheduled for May or June this year, the telecom spectrum sale is likely to be delayed by three to six months.
For service providers, it is a good thing. Now, they have enough time to raise funds and take part in the spectrum auctions.
For service providers, it is a good thing. Now, they have enough time to raise funds and take part in the spectrum auctions.
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Senior officers in the Union Ministry of Communications and Information Technology confirmed that the auction would be delayed, as the department is taking a relook at the entire process.
After the new telecom secretary, J S Deepak, took charge in February, the department is re-evaluating the entire process, including the timing of the auction and the pricing of the spectrum.
Also, the spectrum harmonisation process with the defence ministry is yet to be completed. The ministry would release 3G spectrum - in the 1,800 megahertz (MHz) band - for commercial use.
According to the Telecom Regulatory Authority of India (Trai), the defence ministry will release 330 MHz out of 345 MHz, and this would be auctioned in the 2,100 MHz band (frequency).
Explaining the reason for the relook, a telecom ministry official said: "Deepak has been brought in because of his earlier experience in conducting auctions. This auction of spectrum would be one of the biggest in the country. All the minute details are being re-evaluated, and it will delay the auction by three to six months."
According to estimates of the Union Budget, presented on February 29, the government would earn Rs 55,000 crore from the spectrum auction in the next financial year (2016-17).
"With such a revenue target, the timing of the auction is critical. Many operators have said they will not bid because of high reserve prices suggested by the Trai," another official from the ministry said.
In January, the Trai had fixed reserve prices of various spectrum bands. The reserve price for the new band - 700 MHz - which will be auctioned for the first time, has been fixed at Rs 11,485 crore per MHz, across India.
The new band is considered to be quite good for offering broadband and 4G services. It is much in demand for long-term evolution (LTE) deployment because of its efficiency and high penetration inside buildings. As it has a lower frequency, it provides wider coverage, reducing the number of towers needed to set up the LTE network, cutting down capital expenditure.
But leading telecom players such as Bharti Airtel and Vodafone have expressed concern on the high reserve price of spectrum suggested by the Trai.
Many analysts have also said the auction would not generate a huge interest as telecom players are already hard pressed for funds in such a competitive sector.
Operators have been saying that the ecosystem for 700 Mhz - low-cost handsets, network equipment - was not ready yet. The cost of delivering mobile services in the 700-MHz band is about 70 per cent cheaper than that in 2,100 MHz.
Trai, in its recommendations, also suggested that the Department of Telecom (DoT), in co-ordination with the defence ministry and the telecom service providers (TSPs), should complete the harmonisation process in the 1800MHz band before the coming auctions.
Hemant Joshi, partner, Deloitte Haskins & Sells LLP, said the operators' ability to pay for spectrum will be constrained as the balance sheets are already over-stretched. "The timing of auction should be carefully considered so that all players can effectively participate. At present, operators are busy rolling out services for the spectrum acquired in recent auctions and grappling with challenges of servicing debt and maintaining healthy profitability and cash flows."
Besides, the March 31 deadline for spectrum harmonisation is likely to be missed.
The earlier deadline was fixed at December 31, 2015. After the harmonisation, the defence ministry is expected to release spectrum for commercial use and the released spectrum will be in contiguous blocks - which enables efficient utilisation of spectrum.
In January last year, the government had approved setting up a defence band, to be used by defence services, while the rest will be vacated for commercial use.
Swapping of 15 MHz of 3G spectrum between the defence services and the telecom ministry also is yet to take place. Unless, the spectrum is vacated by the defence services, the auction is not possible.
The Trai's proposals will be considered by the DoT, and the details of the auction would be finalised by the Telecom Commission - the highest policy-making body of the department. Then, it will go to the Cabinet for approval.
J S Deepak, the telecom secretary, has been credited with the smooth auction of 3G and broadband wireless access spectrum in 2010 - when he was joint secretary (telecom) - which earned the government Rs 1.06 lakh crore.
In 2012, Deepak was brought in to handle 2G spectrum auction after the Supreme Court cancelled 121 2G licences given out during the tenure of former Telecom Minister A Raja.
His inputs were taken for the more recent coal block auctions, too.
| IN SLOW LANE Spectrum auction, expected to take place in May or June, has been delayed by three to six months |
| RELOOK The telecom department is taking a relook at the entire process - timing and pricing - since the new secretary, J S Deepak, took charge in February WAIT FOR DEFENCE
According to Budget Estimates, the government expects Rs 55,000 crore from spectrum auction in 2016-17 EXPERT PREDICTION Experts claim the government could earn Rs 5.36 lakh crore from the auction of all the spectrum, as suggested by the Trai TELCOS' CONCERN High reserve prices could inhibit aggressive bidding. Operators are rolling out 4G services, the spectrum for which was acquired in previous auctions, with huge debts |
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