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Corporate Jan 30, 2013

Now, GSM telcos want 1800 mHz spectrum price to be halved

By Sindhu Bhattacharya

New Delhi : The second round of airwave auctions is just a month away but telecom companies continue to seek lower reserve price for spectrum.

After the government reduced the price of 1,800 mHz 2G spectrum in four circles by 30 percent and CDMA spectrum by 50 percent, GSM telcos are crying foul.

AFP

The GSM telcos now want prices for 1,800 mHz 2G spectrum reduced by half and this reduction to be applicable across all telecom circles. AFP

The GSM telcos now want prices for 1,800 mHz 2G spectrum reduced by half and this reduction to be applicable across all telecom circles of the country, not just the four circles of Delhi, Mumbai, Rajasthan and Karnataka.

The plea, made in a letter to Telecom Minister Kapil Sibal by GSM lobby Cellular Operators Association of India (COAI), comes after the government slashed reserve prices for CDMA spectrum (800 mhz) by 50 percent across the country.

The COAI has substantiated its plea by pointing out that:

1) if 50 percent reduction across the country was possible for CDMA, which the government itself has acknowledged as "dying" technology, why was the reserve price for 1,800 mHz (which is used for 2G operations) reduced by only 30 percent and that too in only four circles. The price should be halved in all circles.

2) The spectrum band allocated to GSM - 1,800 mHz - is far less efficient than that allocated to CDMA (800 mHz). This is another reason why the prices of the less efficient 1,800 mHz spectrum band should be slashed by 50 percent.

3) Since there is parity between 900 mHz spectrum (which is held by incumbent telcos and is being used for 2G services) and 800 mHz spectrum (which is being used for CDMA), the prices of spectrum in these two bands should be equal.

If the government were to agree to the COAI's plea, it would mean those telcos which participated in the first round of 2G auctions will get relief since the reduced spectrum price would mean lesser outgo. But why would the government consider this bizarre plea at all?

As per the decisions till now, price for 800 mHz CDMA spectrum has been fixed at Rs 9,100 crore for a block of 5 mHz of spectrum (down from Rs 18,200 crore earlier). The government was forced to reduce CDMA spectrum price substantially since the CDMA auction was a total failure, with no takers at the earlier price.

Now, the new price may see participation from only one CDMA telco-Sistema Shyam-but the government is unlikely to extend this kind of price reduction to everyone for 1800 mhz as well.

The Telecom Ministry has fixed the date for second round of spectrum auctions as March 11. Spectrum in the 900mHz band will only be auctioned in Delhi , Mumbai and Kolkata.

This is because older operators will have to release spectrum that they hold, once the validity expires towards the end of 2014. The auction for 800 mHz band spectrum will be held for 21 circles, leaving out Rajasthan where the airwaves are not available.

The government will raise at least Rs 4,500 crore if it sells all the spectrum in the auction that starts on 11 March. Spectrum auction in the 900 mHz and 1800 mHz bands will be completed simultaneously across all circles while for the 800 mHz band, the auction will be conducted separately for each circle.

by Sindhu Bhattacharya

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