Spectrum Auction May Fail at Current Base Price: GSMA

Auction of premium radiowaves may fail or seriously limit the investment capability in telecom networks if government sticks to high base price suggested by regulator Trai, a global industry body said Thursday.

"The GSMA is concerned that, if the Telecom Commission maintains the current reserve prices for 700MHz spectrum in India, there is the risk of a failed auction or, at a minimum, serious limitations on investment capability in next generation networks," GSM Association Chief Regulatory Officer John Giusti said in a statement.

The 700MHz band is the most premium spectrum that government plans to put for auction in July. The Telecom Regulatory Authority of India has recommended Rs. 11,485 crore per megahertz of radiowaves in this band which is the highest ever for any spectrum.

The cost of delivering mobile services in 700MHz band is estimated to be around 70 percent lower than 2100MHz band, which is widely used for 3G services.

GSMA said that the high price of spectrum will denying the enabling social and economic power of 700MHz band spectrum resource to the citizens of India.

"The reserve prices for this much-needed spectrum are unrealistic in relation to the economics of the mobile industry. In fact, the total recommended reserve prices of Rs. 536,239 crore (over $80 billion) for the spectrum bands in the auction are almost double the cost of all spectrum investment to date in India," Giusti said.

This equates to more than 20 times the annual free cash flow of the entire mobile industry in India, it said.

Telecom operator Telenor has already said spectrum price in India are too high and indicated that it may exit from the country if fails to procure spectrum at reasonable price.

"In the event that the spectrum reserve prices are not reduced, the Indian government runs the risk that spectrum will go unsold, as happened in Australia and recently in Senegal," Giusti said.

This would be extremely damaging not only for the Indian mobile industry, but also for the country's economy overall, depriving citizens and businesses in India to the full potential of high quality mobile broadband services, Giusti said.

GSMA appreciated government's decision to reduce Spectrum Usage Charges, charged annually, from five to three percent of revenues earned from telecom services.

However, Giusti said that it will not do enough to offset such high spectrum prices.

"The GSMA urges the Indian Government to reconsider the auction reserve prices in order to better reflect local market conditions, allow competition in the market to determine fair prices for this spectrum, and help meet its objectives of increasing mobile broadband access for all," Giusti said.