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Corporate Sep 10, 2013

Bharti, Idea to gain most from nearly 60% cut in 2G spectrum base price

By Firstbiz Editors

If the government accepts telecom regulator Trai's recommendations, telcos will get to bid for 1800 mhz or 2G spectrum at almost 60% lower prices compared to those at which auctions began in March this year.

It has also further legitimised refarming of 900 mkhz spectrum band by saying no spectrum will be reserved for telcos who already hold spectrum in this band, creating a level playing field.

Analysts said the cut in reserve prices is positive for incumbents and more such moves may come considering lower demand for spectrum at higher prices.

Bharti Airtel gained 4.6 percent, Idea Cellular is up 4.3 percent while Reliance Communications gained 2.3 percent.

Trai has recommended that pan-India base price for per mhz of 1800 mhz spectrum band be fixed at Rs 1,496 crore versus Rs 3,622.18 crore in March. For the first time, it has recommended base price for each telecom circle so that in some cases the price reduction is over 60% and in some others it is lesser.

For the 900 mhz band, it has recommended a pan India base price of Rs 288 crore for Delhi, Rs 262 crore for Mumbai and Rs 100 crore for Kolkata. For these circles, telcos will have to begin bids in the 1800 mhz band at Rs 175 crore for Delhi and Rs 165 crore for Mumbai circles.

AFP

Base price is the minimum price at which telcos can begin to place bids for acquiring spectrum in a any particular band.
AFP

Trai has said that for auction of spectrum in 1800 MHz band, the block size should be of 2 x 200 KHz each and the existing licensee will have to bid for a minimum of 3 blocks. A new entrant will be required to bid for a minimum of 25 blocks of 2 x 200 KHz each.

And for auction of spectrum in 900 MHz band, the block size should be 2x1 MHz with the condition that each bidder will have to bid for a minimum of 5 blocks.

Base price is the minimum price at which telcos can begin to place bids for acquiring spectrum in a any particular band.

Trai has taken complete lack of interest by telcos in GSM spectrum auctions in the last round, changed macro economic conditions and failing health of telcos who are overleveraged - all these factors have been taken into consideration by the regulator before recommending a huge cut in reserve price of spectrum in both, 1800 and 900 mhz bands.

Earlier, the 900 mhz band spectrum was priced at twice the value of the 1800 mhz band but from recommendations today it is obvious that the multiple of two has been done away with.

The government has been under tremendous pressure to lower auction reserve prices of spectrum in different frequency bands since not a single GSM telco participated in the March auctions and only a fraction of anticipated revenue was generated after the first round of auctions in November.

With such a massive cut in reserve price, any subsequent auction should see enthusiastic response from telecom companies.

by Firstbiz Editors

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