Telecom minister Ravi Shankar Prasad may have got the telecom industry up in arms over his campaign against call drops, but he’s also addressing the industry’s biggest constraint, spectrum shortage. While the groundwork for releasing 3 carriers of 5MHz each in the 2100MHz band was done by the UPA, the agreement with the defence ministry got stuck—that is why this additional spectrum was not put on offer in the 2015 auctions which led to a desperate scramble for spectrum and the resultant high bids. With the defence ministry’s doubts put to rest, this spectrum will now be available in the July auctions. The moves to allow spectrum trading and sharing have been equally critical since, while top telecom companies are keen to take on the spectrum others have, they do not wish to take on the large quantities of debt that go along with this—spectrum sharing/trading takes care of this problem. While there are still a few deals to be struck, some big deals already done are those of RCom and RJio and Bharti Airtel with Videocon and Aircel.
As reported by FE on Tuesday, by June 15, telcos will have completed the harmonisation of their spectrum. According to the agreement with the telecom ministry, the defence ministry is to get 20MHz in the 1800MHz band, but this spectrum—along with that of the private telcos—is scattered across the band. For it to be more useful, especially for data services, the spectrum should be contiguous and at least be 5MHz in size. Vodafone, for instance, has two chunks of 3.4MHz and 4.4MHz of 1800MHz spectrum in Gujarat, but cannot use them for data as they are not contiguous. But now, with the defence ministry and private telcos swapping spectrum, each will get contiguous spectrum. While Vodafone will now be able to offer 4G services in another 3-4 circles using the spectrum it already has, Idea has paid for spectrum in 4 circles but was not allocated this across the full area—with harmonization, it will now get the spectrum in the full circle in the case of Haryana, Maharashtra, Punjab and the North East. From the government’s point of view, the move will throw up another 7MHz of contiguous spectrum across the country which, at even the base price, will fetch it another R20,000 crore.
Prasad would do well to now work on how prices are set for auctions. If setting the last auction bid as the reserve price for the next auction is not bad enough, as this newspaper has pointed out, the pricing of 700MHz is completely illogical (goo.gl/t5CSuC). Though less ridiculous, reserve prices are too high and illogical in other frequencies as well. In the 2010 auction, for instance, Delhi and Mumbai accounted for 14.5% of the revenue across the country but the reserve price for 2100MHz spectrum was 40% of that for the entire country. Since Trai still continues with irrational pricing, Prasad would do well to have a detailed study of this and its impact—when the 700MHz auction fails and the Cabinet has to take a call on reducing the reserve price, this exercise will be critical.
