Govt delays spectrum sale to February 3

This issue is critical as higher SUC for the extra spectrum will eat into their profitability.

Written by ENS Economic Bureau | New Delhi | Published: December 29, 2013 2:00:34 am

The government has delayed the planned auction of airwaves to February 3,delaying by two weeks the bidding by the telecom service companies for the bands.

A Reuters report said the government did not give a reason for the delay in a revised auction schedule posted on the telecom ministry’s website,but it has yet to take a decision on a change recommended by the sector regulator in the annual fee carriers pay for using spectrum.

The notice has also said that prospective bidders will have to submit applications by January 15 to participate in the auction,according to the new schedule.

The telecom ministry plans to auction airwaves in the 900 and 1800 MHz frequency bands. For the leading telecom service providers including Bharti Airtel and Vodafone the auctions will give them vital chunks of additional spectrum they have been demanding for years.

But the companies had differed among themselves what will be the annual rates for spectrum usage charges. While the Telecom Regulatory Authority of India has suggested bringing all the rates to a common level of three per cent of adjusted gross revenue,the two major telecom industry bodies have differed.

While the GSM service based companies like Bharti and Vodafone are fine with it as they pay charges between 3 and 6 per cent,companies on CDMA licences and on BWA platform like Reliance Jio,which pay a one per cent charge have objections. But all are agreed that the government must decide on the issue before the start of the auction.

The government is keen to resolve the differences as it thinks it can raise at least

Rs 11,000 crore from the auction though experts are convinced the sum could reach Rs 40,000 crore. Also as India has one of the smallest telecom bands in the world per telecom circle at about 100 MHz,this is compromised the expansion of telecom services. In heavy traffic circles call drop and slow data services are heavy complaints.

Companies like Bharti need the 900 MHz to deploy 3G services which includes data and is rapidly becoming the cash cow for the sector that has plummeted into losses in the past two years.

But while they upgrade their service in the 900 MHz band the companies need the 1800 MHz band as temporary parking slots to keep services running. But if they have to pay a higher spectrum usage charge (SUC) for the additional bands,this will cut into their profits significantly.

This will make the auctions unaffordable for all of them and make the bids very tepid for the band.

Companies like Reliance Jio feel that a migration to a flat SUC will be unfair for them since they were allowed to offer voice licence in addition to data services on the promise of a lower SUC.

One of the options being considered is to make the migration to the common SUC happen over stages so that the impact on the cash flow of the companies is minimised. The price discovered in the auction will also act as the base price for companies to renew their permits in some key cities,which are due this year.

Unresolved fee

* For telecom companies,the auction in the 900 and 1800 MHz bands would give them much-needed extra spectrum

* Operators in the GSM,CDMA and BWA spaces differ on spectrum usage charges (SUC)

* This issue is critical as higher SUC for the extra spectrum will eat into their profitability

* The government is keen to resolve the issue as it expects R11,000 crore from the auction

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