Trai Suggests 10 Percent Higher Base Price for Next Spectrum Auction

The telecom regulator Trai has recommended a starting price that is about 10 percent higher for the next round of spectrum auctions for the 1800MHz band, also known as 2G band.

The regulator said since spectrum auctions should not be conducted for Maharashtra and West Bengal service area due to non-availability of full spectrum, the base price of spectrum that will be put for auction will be Rs. 2,138 crores per megahertz.

However, the price recommendation would still be higher by around 10 percent while comparing the forthcoming auction of airways in the Licence Service Areas (LSAs) with the earlier one. This is based on the estimated higher average data use as compared to the earlier period.

In the February 2014 auction, government had received bids valued at Rs. 2,270.4 crores per megahertz in 1800MHz band of airwaves.

The Telecom regulatory Authority of India has suggested price of Rs. 3,004 crores per megahertz for premium 900MHz band, in which mobile signal covered about twice more area than 1800MHz.

The price is only for 18 out of 22 service area as spectrum in this premium band is not available in Jammu and Kashmir, Delhi, Mumbai and Kolkata service area.

The spectrum auction is to be conducted for airwaves in 900MHz held by existing telecom operators - Airtel, Vodafone, Idea Cellular and Reliance Communications - through their licences that are expiring in 2015-16.

In the 900MHz band about 184MHz of spectrum is likely to be auctioned. In 1800MHz, government has proposed to auction 104MHz of spectrum which included spectrum held by licences that are expiring in 2015-16 and unsold airwaves in February auction.

However, government wants to keep 8.2MHz of spectrum as Defence band which leaves only 104MHz spectrum available for auction.

While suggesting price of 1800MHz band, Trai has said used various approaches and derived their average expected valuation. The regulator then compared it with price achieved in February auction and suggested taking higher of the two prices.

"The Authority recommends that the average expected valuation of 1800MHz spectrum should be the higher of the two figures - average expected valuation based on simple mean or the price realised in February 2014 auction in each licenced service area (LSA)," Trai said.

For the premium 900MHz, the regulator decided "that the value of 900MHz spectrum in each LSA should be the lower of the two figures - average valuation of 900MHz or twice the value of 1800MHz spectrum."

The regulator has also recommended that the reserve price for North East LSA may be fixed at a discount of 50 percent on the recommended reserve price.