India’s Telecom Commission—the highest decision-making body in the Department of Telecommunications—has set the price for bidding in the country’s upcoming 2,100 MHz band spectrum auction at INR 37.05 billion (US $604.2 million) per MHz. This price is 36 percent higher than the price of INR 27.2 billion (US $443.6 million) that was recommended by the Telecom Regulatory Authority of India (TRAI). In addition, the Telecom Commission has agreed to auction only 5 MHz of spectrum and not the additional 15 MHz that are also available due to spectrum that has been freed up by the defense ministry. Much larger blocks of spectrum in the 800 MHz, 900 MHz and 1,800 MHz bands will also be auctioned at prices that the government has also set to be higher than the regulator’s recommendation. India’s government wishes to raise between INR 80 billion (US $1.3 billion) and INR 1 trillion (US $16.3 billion) from this auction. The auction, which was originally scheduled to take place in February, has been pushed to 4 March. While India’s Department of Telecommunications did not specify the reason for the delay, it could be caused by the lack of agreement as to the price of spectrum, particularly in the 2,100 MHz band.
As we have previously written, India’s government wanted to raise INR 40 billion (US $652.3 million) in the country’s 2014 spectrum auction, but it actually garnered under INR 10 billion (US $163.1 million). It appears that with the present auction, as with the one in 2014, India’s government is only considering maximizing revenue as a factor to determine the base price for bidding. While the government has a deficit to reduce, it should have no reason to believe that taking this route of high reserve prices would have any more success than it did in the past. But keeping spectrum prices low might be more in the interest of the country’s telecom sector. India’s very large mobile market has a lot of potential to grow and to enable the country’s MNOs to expand their networks and increase services because lower spectrum prices will result in the MNOs having more money for infrastructure investment. It has become clear that in developing nations, the growth of the telecom sector adds to the growth of the country’s overall economic status, mainly because in these “mobile first” countries mobile broadband enables internet access as a means of conducting business in many industries. The Telecom Commission may also want to take note of TRAI’s warning against the higher prices because it may also result in the operators not presenting any bids.
“Developing nations in particular should consider many factors when setting reserve prices for spectrum auctions. As smartphones are becoming more affordable in these countries and users are seeing the value of data use, operators need to build out their networks to be able to provide more coverage and better service. The growing mobile sector in these countries will help to drive their economies upward, and governments should be mindful of affording operators ways to upgrade infrastructure.”
Jamie Davella,
Research Analyst at Tarifica
The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues or to speak with the research team: http://www.tarifica.com/contactus.aspx
