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Indian Telecom Commission gives recommendations for 2G auctions

The Indian Telecom Commission has provided suggestions for the country’s upcoming 2G spectrum auctions, calling for more spectrum to be made available, as well as a review of the auction’s controversially high base prices.

The chair of the Commission, R.Chandrashekhar, has requested that the country’s regulator TRAI (Telecom Regulatory Authority of India ) consider “the impact of this spectrum price on the tariffs if this entire impact is passed on [and] the impact on the investments, viability and the return on the investments.”

The base price suggested by TRAI for a nationwide 1800MHz licence is INR36.22 billion (US$689.6 million). The same spectrum was auctioned in 2008 for less than one tenth of this price, in a process dismissed by the Indian Supreme Court as “totally arbitrary and unconstitutional”. The undervalued licences may have lost revenue worth up to US$39 billion for the Indian government.

The high base price has come under fire from Indian operators, along with the low number of slots that TRAI has recommended. The regulator has proposed that just 5MHz be made available in each of the country’s service areas – a figure which the Telecom Commission suggests should be doubled.

If the Commission’s recommendation is acted upon, the availability of additional spectrum would likely drive down the reserve prices. The 10MHz would consist of eight slots of 1.25Mhz, with operators able to purchase specific allowances based on how long they have been in the market: two slots for start-ups, four for established operators.

However, not all of the Commission’s suggestions are as popular with operators – it has backed TRAI’s proposal of auctioning spectrum in the 900MHz band next year. Operators which already hold spectrum in this band, such as Vodafone and Bharti, have objected to the proposal as they would be required to refarm their spectrum once their licences for it expire.

This is significant as the spectrum in the 900MHz band would be refarmed for the lower quality 1800MHz band, forcing operators to essentially repurchase their spectrum at the steep proposed base prices.

The Cellular Operator Association of India (COAI) recently published a report claiming that if the auctions proceed with the current base prices, local operators could incur as much as US$50 billion in debt across the next five years.  

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