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TRAI proposes a steep hike in 2G Spectrum among many other recommendations

Telecom Regulatory Authority of India (TRAI) has today announced its Recommendation on Auction of Spectrum proposing a base price of Rs. 3622.18 crores for the All India 2G Spectrum in 1800 Mhz which is higher than the base price set for the 3G Auctions in 2010. Where as the spectrum in 900 Spectrum shall cost an upward of Rs. 7244.36 crores as per these recommendation.  This steep hike in the base price is a big blow to the operators whose licenses were cancelled in February this year and to the existing operators as well.

For the new entrants or license cancelled operators waiting 2G auctions, it would mean more outlay which is for sure drive the tariffs north. We might not be able to enjoy calls at 50p in the near future. As for the incumbents, this would affect them when they would come renewing their license which is starting 2014. One thing is for sure, the consumers would suffer at the end.

Reserve Price per MHz (in Rs. Crore)

S .No. Licence Service Area 700 MHz 800 MHz 900 MHz 1800 MHz 2100 MHz 2300 MHz

1

Delhi

2869.04

1434.52

1434.52

717.26

747.17

126.2

2

Mumbai

2808.56

1404.28

1404.28

702.14

731.43

129.13

3

Kolkata

470.76

235.38

235.38

117.69

122.6

29.46

4

Maharashtra

1087.96

543.98

543.98

271.99

283.34

51.56

5

Gujarat

930.76

465.38

465.38

232.69

242.39

34.57

6

AP

1187.72

593.86

593.86

296.93

309.31

59.64

7

Karnataka

1366.56

683.28

683.28

341.64

355.89

86.91

8

Tamil Nadu

1267.12

633.56

633.56

316.78

329.99

116.54

9

Kerala

270.32

135.16

135.16

67.58

70.39

14.57

10

Punjab

278.52

139.26

139.26

69.63

72.54

18.71

11

Haryana

192.56

96.28

96.28

48.14

50.14

6.75

12

UP – West

444.64

222.32

222.32

111.16

115.79

10.35

13

UP – East

315.32

157.66

157.66

78.83

82.12

8.02

14

Rajasthan

277.68

138.84

138.84

69.42

72.32

5.48

15

M.P.

223.48

111.74

111.74

55.87

58.2

7.02

16

West Bengal

106.96

53.48

53.48

26.74

27.85

4

17

H.P.

32.2

16.1

16.1

8.05

8.39

1.16

18

Bihar

175.96

87.98

87.98

43.99

45.83

5.59

19

Orissa

83.92

41.96

41.96

20.98

21.85

3.58

20

Assam

35.88

17.94

17.94

8.97

9.34

1.86

21

North East

36.6

18.3

18.3

9.15

9.53

1.2

22

J&K

26.2

13.1

13.1

6.55

6.83

1.2

Total

14488.72

7244.36

7244.36

3622.18

3773.24

723.5

As far as spectrum for the 700 Mhz is concerned, TRAI recommended that it is not the right time for its auctions as the LTE ecosystem is not yet fully developed. It also recommended to wait till 2014 to realise the full market value of the 700 Mhz spectrum.

With regards to the Auction Structure, TRAI recommended that spectrum shall be conducted using Simultaneous Multiple Round Auction (SMRA) format (just like 3G). Simultaneous multiple-round auction is one where every license is up for bidding at the same time. Participants may bid on multiple licenses at once. All licenses will continue to be for sale until there are none left or there are no buyers.

Further, it recommended that Spectrum shall be offered in blocks of 1.25 MHz each and Every auction shall be open to all those holding CMTS licence/ UAS licence / Unified licence or eligible for grant of Unified Licence. Auction shall not be open to those that hold spectrum above the prescribed cap. The Authority further recommended deferred payment of the bid amount by the successful bidders which is as follows:

Spectrum Initial Payment Moratorium Period for balance payment
Supra-1 GHz (1800,2100 and 2300 MHz bands) 33% of the Bid amount 2 years 10 years (equal annual instalments)
Sub-1 GHz bands (700,800 and 900 MHz bands) 25% of the Bid amount 2 years 10 years (equal annual instalments)
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