In a softening of their earlier stand, the department of telecommunications (DoT) has decided to keep the validity of spectrum to be given in the coming auction for 20 years, instead of the 10 years it had proposed. The licence period will also be for 20 years, it has said in a draft note on the auction guidelines and allotment of spectrum.
DoT had asked the telecom regulator, Trai, to consider whether spectrum for the 1,800 MHz band in the auction should be given for 10 years instead of 20 years. A DoT official had said the allotment of spectrum would be for 20 years, but the amount paid would be for 10 years; after that, the allottees would have to pay the market price at that time.
The newer companies had opposed this, saying it would make it difficult for them to bid, as 10 years was not a viable period for long-gestation projects such as in telecom. Further, it took eight to nine years for a new operator to achieve break-even under tough competition. Even analysts felt that as spectrum price after 10 years could not be predicted, there would be uncertainty.
The draft note also said service providers might be allowed to convert their existing 1,800 MHz spectrum to liberalised spectrum for a period of 20 years on payment of the auction-determined price. However, the 20-year period would be subject to the licensee acquiring a unified licence on expiry of the existing one. The entry fee already paid by the operators would be adjusted on a pro rata basis on the occasion when the licensees converted into liberalised spectrum.
DoT is the process of framing guidelines for the auction but the main issue of the reserve price has not been decided. An Empowered Group of Ministers (EGoM) was mandated to decide but its chairman, ex-finance minister Pranab Mukherjee, has been nominated for the country’s Presidential election. The EGoM has to be reconstituted and a new chairman chosen. It is learnt DoT might ask for an extension of the auction timeline from the Supreme Court, which had said it must be completed by August 31.
Trai had recommended a base price of Rs 3,622 crore for 1 MHz of 2G spectrum, while a DoT panel had suggested Rs 4,265 crore per MHz.
The Telecom Commission, the highest policy making body of DoT, had referred the issue to the EGoM.
BS
DoT had asked the telecom regulator, Trai, to consider whether spectrum for the 1,800 MHz band in the auction should be given for 10 years instead of 20 years. A DoT official had said the allotment of spectrum would be for 20 years, but the amount paid would be for 10 years; after that, the allottees would have to pay the market price at that time.
The newer companies had opposed this, saying it would make it difficult for them to bid, as 10 years was not a viable period for long-gestation projects such as in telecom. Further, it took eight to nine years for a new operator to achieve break-even under tough competition. Even analysts felt that as spectrum price after 10 years could not be predicted, there would be uncertainty.
The draft note also said service providers might be allowed to convert their existing 1,800 MHz spectrum to liberalised spectrum for a period of 20 years on payment of the auction-determined price. However, the 20-year period would be subject to the licensee acquiring a unified licence on expiry of the existing one. The entry fee already paid by the operators would be adjusted on a pro rata basis on the occasion when the licensees converted into liberalised spectrum.
DoT is the process of framing guidelines for the auction but the main issue of the reserve price has not been decided. An Empowered Group of Ministers (EGoM) was mandated to decide but its chairman, ex-finance minister Pranab Mukherjee, has been nominated for the country’s Presidential election. The EGoM has to be reconstituted and a new chairman chosen. It is learnt DoT might ask for an extension of the auction timeline from the Supreme Court, which had said it must be completed by August 31.
Trai had recommended a base price of Rs 3,622 crore for 1 MHz of 2G spectrum, while a DoT panel had suggested Rs 4,265 crore per MHz.
The Telecom Commission, the highest policy making body of DoT, had referred the issue to the EGoM.
BS