India’s Cabinet on Wednesday approved a proposal for selling 2,251.25 MHz of spectrum worth Rs 3.92 lakh crore at the base price through a spectrum auction.
The development indicates that India will not conduct 5G spectrum auction during the current financial year. Mobile operators such as Bharti Airtel and Vodafone Idea were not keen to spend for buying 5G spectrum next year due to financial conditions.
The government’s decision not to auction frequencies in 3,300-3,600 MHz bands that were identified for 5G services will be a major assistance for telecom operators, analysts said on Wednesday.
“Lower reserve prices would have provided additional resources for network expansion to the telcos. High reserve prices in past auctions have resulted in large amounts of spectrum remaining unsold. We hope the Govt. will take additional measures to boost the financial health of the industry,” said SP Kochhar, director general of COAI.
The telecom ministry plans to issue a notice to invite bids in December and hold the spectrum auction by March, telecom minister Ravi Shankar Prasad said.
“The auction will be for spectrum in 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz frequency bands. Spectrum will be offered for assignment for a validity period of 20 years. A total of 2,251.25 MHz is being offered with a total valuation of Rs 392,332.70 crore at reserve price,” an official statement said.
The notice inviting application will be issued in this month and by auction will be conducted by March, Prasad told reporters after the Cabinet meeting.
The Digital Communications Commission, the apex decision making body of Department of Telecom, in May had approved the spectrum auction plan worth Rs 5.22 lakh crore which included radiowaves for 5G services as well.
However, a part of the 300 MHz of spectrum identified by the DoT for 5G services is being used by the Navy, and the Department of Space has also made claims on a significant portion of these radiowaves.
The industry has also been demanding the government to lower the base price of 5G spectrum as each operator will need to shell out around Rs 50,000 crore for the required quantum of radiowaves for the next generation services.
Prasad did not reply to questions on the status of 5G spectrum. The minister said that the government has retained rules of 2016 for payments in the upcoming auction as well.
Besides the bid price, the telecom operator will need to pay 3 percent revenue share to the government every year.
“In addition to the bid amount, successful bidders will also have to pay 3 percent of the adjusted Gross Revenue (AGR) excluding wireline services as spectrum usage charges for the spectrum won through this auction,” the statement said.
Successful bidders need to pay entire bid amount in one go (upfront) or may exercise an option to pay a certain amount (25 percent for spectrum won in 700 MHz, 800 MHz, 900 MHz bands or 50 percent for spectrum won in 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz bands) upfront and remaining amount in a maximum up to 16 equated annual installments, after a moratorium of two years.
In the auction, bidders will have to comply with parameters/conditions e.g. block size in which bidders will be able to submit their bids, spectrum cap i.e. the maximum amount of spectrum that can be held by each bidder after the completion of the auction, roll-out obligations, payment terms etc.