Cabinet fixes spectrum auction reserve prices for 1800MHz, 900MHz bands

The Cabinet on Monday fixed the minimum price for selling telecom spectrum at up to half the rate set at the previous auction to net at least Rs. 48,000 crores in revenue from the sale planned in January.

"The Union Cabinet on Monday approved the finalisation of the reserve price for auction of spectrum in 1800MHz band for all service areas and for 900MHz band in Metro service areas of Delhi, Mumbai and Kolkata," an official statement said.

The Cabinet, headed by Prime Minister Manmohan Singh, fixed the start price for the sale of spectrum in the 1800MHz band at a pan-India rate of Rs. 1,765 crores per MHz, about 26 percent lower than the base price in the March sale.

"The reserve price for 1800MHz band of Rs. 1,765 crores per MHz pan-India, which works out to be Rs. 8,825 crores for 5MHz pan-India," the statement said.

The Cabinet has approved recommendations made by the Empowered Group of Ministers on telecom, headed by finance minister P Chidambaram.

The high level ministerial panel had recommended that any new entrant will be required to bid for minimum of 5MHz in 1800MHz or in 900MHz band.

Sources at the Telecom Ministry said that they will make efforts to start the auction by January 21 and the Notice Inviting Application (NIA) may be issued in the next couple of days.

(Also see: Spectrum auction NIA document expected in 15-20 days: DoT)

Telecom operators, whose licences are not expiring in 2014, have been allowed to bid for minimum of 600 kilohertz of spectrum in 1800MHz band and 1MHz in 900MHz band as per the EGoM recommendations.

The maximum quantum of spectrum that a company will be able to bid will be mentioned in NIA which will be capped at 25 percent of total spectrum allotted in a service area.

For the 900MHz band, it approved a rate up to 53 percent lower than the previous auction price.

(Also see: TRAI reiterates spectrum auction proposal to cut base price by 60 percent)

The reserve price for 900MHz band is Rs. 360 crores perMHz for Delhi, Rs. 328 crores for Mumbai and Rs. 125 crores for Kolkata, the statement said.

The EGoM had suggested fixing the base or minimum price for the auction of spectrum in the 1800MHz band at pan-India price of Rs. 1,765 crores perMHz, 15 percent higher rate, than suggested by telecom regulator TRAI of Rs. 1,496 crores.

The base price of 900MHz band accepted by EGoM is also 25 percent higher than what was suggested by the Telecom Regulatory Authority of India (TRAI).

The government has decided to auction 403.2MHz of 2G spectrum in the 1800MHz frequency, which at the base price finalised by the Cabinet, amounts to about Rs. 36,385 crores.

About 46MHz of spectrum in the 900MHz band held by Bharti Airtel, Vodafone and Loop Mobile in Delhi, Mumbai and Kolkata will also be auctioned as their licences are due to expire in the last quarter of 2014.

At the base rate finalised by the Cabinet, the spectrum in the three metros may fetch about Rs. 12,300 crores.

Together, the 900MHz and 1800MHz band airwaves are valued at about Rs. 48,685 crores.

The government has provisioned garnering Rs. 40,874.5 crores from spectrum revenue in the Budget, including upfront money from the auction and various fees levied on airwaves used for commercial mobile communications.

Successful bidders, however, will have the option of paying the spectrum price in instalments.

If the entire spectrum is sold at the base price and bidders opt to pay in instalments, the government may get only about Rs. 15,000 crores in this fiscal from the auction.