Trai needs to revise spectrum price

The Telecom Regulatory Authority of India has recommended auction of 700 MHz spectrum for the first time, at a reserve price of Rs 11,485 crore per MHz, the highest reserve price ever. It is 43 per cent over the last auction of spectrum in the 900 MHz band, which came to Rs 8,000 crore per MHz. Whether this price is justifiable, or not, is the issue.

There is a view that the benefits, like better voice clarity, will be far outweighed by the price. Besides, the companies would pass on their burden to the consumer who would have to pay higher rates. There is already an outcry among the big four players against this high price even though the 700 MHz band is more efficient for 4G services than 900 MHz as it is low frequency and offers continuous spectrum availability.

Experts also feel that the price is too high and that there may be few or no takers. The government, experts say, will have to revise its base price at least in the two metros of Mumbai and Delhi, and in Category A circles like Maharashtra, Karnataka, Gujarat, Andhra Pradesh and Tamil Nadu where prices are very high.
One can understand the government’s desperate need for funds to maintain its fiscal deficit target and its various social sector programmes.

Its divestment programme, which was to bring over Rs 40,000 crore this year into the kitty, is in the doldrums because of the weak and volatile equity markets. Hence the attempt to make a huge profit by selling spectrum. This base price for the 700 MHz band will get the government more than Rs 5,44,000 crore, about five times the amount raised in the previous auction in 2015.

Those in the know say the government floats a high base price to test the market and will surely revise it. But by how much is the real question. They feel Trai could reduce the base price by 20-25 per cent to bring it below Rs 10,000 crore per MHz and then this spectrum sale would have a better chance.

The earlier auction had buyers, even though the base price was thought to be high, as they had to renew their licences. This time there is no such dire necessity. Telecom service providers also say that the 4G handsets are not available in the quantity needed so there is no hurry to buy spectrum. 

Besides, as the Cellular Operators Association director-general has said Trai has overlooked the new market dynamics of spectrum which are radically different thanks to the government permitting trading and sharing of airwaves. So it would be in the interest of all stakeholders, including consumers, if Trai reconsiders its pricing for the 700 MHz band.