The Telecom Commission on Saturday favoured putting all available spectrum for auction at price suggested by sectoral regulator Trai, which could fetch the exchequer around Rs 5.36 lakh crore.
“TC is of the view that all available spectrum should be put for auction at Trai-recommended price in the upcoming auction. It will be send to the Cabinet for final approval,” a source said. The auction is to be held in July and would include sale of most premium 700 Mhz band at a price of Rs 11,485 crore per Mhz. The cost of delivering mobile services in this band is estimated to be around 70 per cent lower than 2100 Mhz band, used for providing 3G services.
As per the rule approved by the inter-ministerial panel chaired by Telecom Secretary JS Deepak, a company interested in buying spectrum in 700 Mhz band will need to shell out a minimum of Rs 57,425 crore for a block of 5Mhz on pan-India basis. This band alone has the potential to fetch bids of over Rs 4 lakh crore.
The total potential revenue of Rs 5.36 lakh crore from the spectrum sale is more than double of telecom services industry gross revenue of Rs 2.54 lakh crore reported in 2014-15 financial year. leading operators have requested to defer sale of 700 MHz spectrum, saying that ecosystem for providing services in this band was not developed and sale would lead to underutilisation of the spectrum for several years and block industry's fund.
As per global body industry body GSMA, the total recommended reserve price for the auction is almost double the cost of all spectrum investment to date in India and more than 20 times the annual free cash flow of the entire mobile industry.
The Government expects a revenue of Rs 98,995 crore from the sector in 2016-17, which includes proceeds from spectrum auction and other fees levied by the DoT. The panel has also suggested stringent payment conditions compared to liberal method suggested by Telecom Regulatory Authority of India.
The panel has favoured that companies winning spectrum in higher frequency bands -- above 1Ghz like 1800 Mhz, 2100 Mhz, 2300 Mhz -should make 50 per cent upfront payment and rest in 10 years after a 2-year moratorium. In earlier auctions, companies were given option to make 33 per cent upfront payment. For spectrum below 1Ghz band such as 700 Mhz, 800 Mhz, 900 Mhz, companies will require to pay 25 per cent upfront and rest in 10 years after a 2-year moratorium. It is in line with practice of earlier auctions but differs from Trai suggestion.
Trai had recommended that the Government should charge only 10 per cent of bids received for spectrum, and the balance payment should be made over a period of 18 years in equal instalments with interest. The panel however deferred decision on contentious issue of spectrum usage charge (SUC) from telecom operators annually. Reliance Jio Infocomm and some leading operators have locked horns on this issue.
According to a source, technical committee at Department of Telecom has suggested to levy 4.5 per cent SUC uniformly on all operators as it is not possible to ensure their earning from any particular spectrum band. The TC has decided to take legal opinion on the issue and discuss it along with the technical committee report in next meeting.
SUC was earlier linked to quantum of spectrum holding of an operator in the range of 3-8 per cent of their adjusted gross revenue. After evaluating the impact on the exchequer, government in January 2014 decided to cap SUC at 5 per cent on spectrum that were to be procured in future auction. The SUC collection was at 4.8 per cent level that time.
Telecom operators at that time were asked to pay the weighted average of their existing SUC (on old rate of 3-8 per cent), and 5 per cent if they acquire new spectrum. Trai has recommended to charge SUC at uniform rate of 3 per cent across the industry. Reliance Jio has contested this view as it pays only 1 per cent SUC on its spectrum in 2300 Mhz band and proposal to levy 3 per cent would put extra burden on the company.
The DoT is also in discussion with Defence Ministry to get 15 Mhz of 3G spectrum freed for the upcoming auction. Trai has recommended pan-India base price of Rs 3,746 crore per Mhz for this band.
The TC is learnt to have approved Rs 2,873 crore per Mhz for pan-India 1800 Mhz band, Rs 817 crore per Mhz for 2500 Mhz and 2300 Mhz and Rs 5,829 crore for 800 Mhz. Trai has recommended base price for 900 Mhz spectrum in six circles which the panel has approved.