The Indian regulator TRAI (Telecom Regulatory Authority of India) has recommended that the reserve prices for 2G spectrum be slashed to 60% of those set during the previous auctions in November and March.
The proposal covers 900MHz spectrum in the Delhi, Kolkata and Mumbai circles; for nationwide 1800MHz frequencies, the regulator proposes a 37% cut.
The move acknowledges that the previous auctions generated little interest from operators – largely due to claims that the spectrum was overpriced. The government of India is unlikely to be happy with the proposals; it has been keen to value the 2G spectrum based on the reserve prices for the upcoming 3G spectrum auctions. TRAI has specifically advised against this.
Although operators are sure to be happy with the proposal, Bharti Airtel and Vodafone would still be required to re-bid for their current 900MHz and 1800MHz spectrum licences. The two market leaders are embroiled in an ongoing dispute with the Department of Telecommunications concerning their rights to extend their existing 2G licences.
TRAI has also suggested that the government should be more transparent in its plans for spectrum licensing, as well as recommending that operators should be allowed to trade spectrum acquired at auction more freely.
The regulator also proposed increasing the annual spectrum usage charge by 3% of an operator’s annual gross revenue. Currently operators typically pay between 3% and 8% of their AGR, with the figure varying based on the amount of airwaves they hold.
The lacklustre interest in the previous round of 2G auctions prompted a ministerial request for TRAI to recommend a new pricing strategy. Stakeholders were invited to provide responses for the draft proposal. For the new recommendations to be passed, they require the approval of both the DoT and the Indian government.