Implications of TRAI Recommendations of 1800Mhz Spectrum Auction

1800MHz Spectrum Auction IndiaTRAI in its recommendations released yesterday said that for the upcoming 1800Mhz spectrum auction, a 40-70% cut to reserve prices is necessary and suggested that spectrum trading should be allowed and ensure need for a successful auction. We analyze the implications of TRAI Recommendations of 1800MHz.

Lower reserve price by 40-70% for 1800MHz and 900MHz bands – hopefully the operators can at least turn up to the auctions and find some benchmarks for spectrum renewals starting late-2014.

Spectrum trading is allowed but only for spectrum telcos bid/win through the auction (or they pay the market price). This is important to any possible M&A (but arguably the smaller end has already consolidated/ scaled back). A 1% transfer-fee is to be paid to the government.

Spectrum neutrality can kick in even for the existing spectrum operators own, provided they pay the market discovered price. A 3% flat spectrum usage charge – again for all the auctioned spectrum. For the rest (excl. BWA), a 5% cap is suggested.

Spectrum Payment may Move Towards Front Loading
TRAI’s previous proposal was to pay 25-33% upfront and then the rest over 12 years. It now states that this needs to be decided by the government considering their “current budgetary requirements”. So rather than incurring costs (capex) gradually for telcos, it could be more front-end loaded.

Spectrum Re-Farming Negative for A-Vo-ID Group
TRAI states that the authority finds no reason to revisit this re-farming issue and in fact, it has recommended that there should be no reserved spectrum for the existing operators (was previously meant to be 2.5Mhz at least), and the operators will need to bid for this spectrum.