Trai Sticks to Base Price for Auc­tion

Reg­u­la­tor op­poses DoT view that the 700 MHz band be auc­tioned in 2 parts, says all avail­able spec­trum should be sold at one go

The Economic Times - - Companies - Our Bureau

New Delhi: The tele­com reg­u­la­tor has stuck to its base price rec­om­men­da­tions for the 700 MHz band — termed ex­pen­sive by the in­dus­try — but of­fered an eas­ier pay­ment struc­ture to re­duce the fi­nan­cial bur­den of car­ri­ers.

The Tele­com Reg­u­la­tory Au­thor­ity of In­dia (Trai) on Mon­day also op­posed a view of the tele­com de­part­ment that the 700 MHz band — the most ef­fi­cient for 4G — be auc­tioned in two parts and re­it­er­ated that all avail­able spec­trum in the band be sold.

Trai had sug­gested a re­serve price of .₹ 11,485 crore a unit of pan-In­dia air­waves in the 700 MHz band. A telco bid­ding for 5 MHz of pan-In­dia band­width in this band would have to pay over .₹ 57,000 crore, more than half the en­tire pro­ceeds of the 2015 auc­tions.

To ease the bur­den for car­ri­ers, the reg­u­la­tor said they should be al­lowed to pay10% of the win­ning bid ini­tially for any spec­trum in an auc­tion. The bal­ance, in­clud­ing in­ter­est, could be spread across the next 18 years through equal an­nual in­stal­ments. The reg­u­la­tor also pro­posed that com­pa­nies be al­lowed to pre-pay the en­tire bal­ance or part of it, apart from pay­ing the to­tal amount up­front.

“The lib­eral terms of pay­ment, in the form of re­duced up­front pay­ment and longer pay­ment sched­ule, will re­sult in a sit­u­a­tion where bid­ders would find them­selves in ‘pay as you earn’ sit­u­a­tion and will not be bur­dened by pay­ments in the ini­tial years,” Trai said in its rec­om­men­da­tions.

Cur­rently, an auc­tion win­ner can choose to pay the en­tire money up­front or 25% or 33% of the to­tal ini­tially, de­pend­ing on the band pur­chased. The re­main­der can be paid in 10 equal in­stal­ments af­ter a two-year mora­to­rium.

If Trai’s lat­est sug­ges­tions are ac­cepted by the De­part­ment of Telecom­mu­ni­ca­tions (DoT), op­er­a­tors would get a 19-year pay­ment pe­riod over the 20 years for which they have the right to use the air­waves.

While agree­ing that it would ease fi­nanc­ing, Ra­jan Mathews, di­rec­tor gen­eral of the Cel­lu­lar Op­er­a­tors’ As­so­ci­a­tion of In­dia (COAI), said the 700 MHz pric­ing still re­mains ex­pen­sive.

“Even if I have X num­ber of years to pay for the Rolls Royce I have bought, I still have to pay the en­tire price. It doesn’t al­ter the price of the car. It is still ex­pen­sive,” said Mathews. COAI rep­re­sents GSM op­er­a­tors such as

Bharti Air­tel, Voda­fone and Idea Cel­lu­lar, be­sides new­comer Re­liance Jio In­fo­comm. Trai’s rec­om­men­da­tion was made as part of its re­sponse to the Tele­com Com­mis­sion’s queries on the re­serve price and quan­tum of air­waves to be of­fered in the auc­tion sched­uled for July.

The au­thor­ity said while the pay­ment terms for tel­cos would be libe- ralised, there would be no loss to the ex­che­quer be­cause the in­stal­ment would in­clude in­ter­est. “At the same time, there may be larger par­tic­i­pa­tion of the tele­com ser­vice providers in the auc­tion as they get some lever­age in mak­ing pay­ment over a longer-time hori­zon,” it said.

The move, while eas­ing pres­sure on cash flows, won’t lead to higher de­mand dur­ing auc­tions, said He­mant Joshi, a part­ner at Deloitte Hask­ins & Sells. “It won’t solve a telco’s debt chal­lenges if it is com­pelled to bid at the high prices sug­gested by Trai, es­pe­cially for 4G air­waves in the 700 MHz band,” Joshi said.

The tele­com reg­u­la­tor also stuck to its stand that DoT must har­monise spec­trum in the1800 MHz and 800 MHz bands and auc­tion the ad­di­tional 201 MHz and 26.25 MHz, re­spec­tively, freed up as a re­sult. Har­mon­i­sa­tion makes spec­trum in any band con­tigu­ous or con­tin­u­ous at zero in­cre­men­tal cost, in turn, mak­ing the air­waves more ef­fi­cient for data ser­vices and valu­able as a re­source for auc­tion.

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