Telecom Spectrum – Hot Topic for Rest of 2013

The TRAI has invited Public Comments on the Auction of Telecom Spectrum in India. Incumbents led by Vodafone faces the expiry of its main 900 and 1800MHz licences in India late in 2014 along with the ongoing tax demand for CGT on its original acquisition which remains unresolved. Vodafone is arguing that the spectrum licences entitle the holders to renewal, a point it is making in court, but it is also engaging in government plans for an auction which could be held late this year. Currently the regulator is considering the reserve pricing of the spectrum and given failed auctions earlier in the year we expect a recognition that the pricing of the 3G auctions was not the right reference point and that reserve prices will be reduced.

Uncertainty remains over whether Vodafone, Airtel and Idea will be allowed to use each others’ spectrum for 3G intra-circle roaming which has led to concern of its impact on long-term growth as data demand picks up as it seems to be. Incumbents, however, have won 3G spectrum in most of their important circles (representing 66-74% of revenue). Gradual license renewals should also make their existing 2G spectrum technology neutral, providing flexibility to offer services using 3G or 4G, in time moderating the hit in case they are restrained in 3G roaming.

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