Spectrum re-auction: EGoM meet today to take a call

New Delhi: Will the government now hold another auction for 1800 MHz spectrum band, at least in four circles of Delhi, Mumbai, Rajasthan and Karnataka, by lowering spectrum price?

This is among the many crucial decisions on spectrum pricing expected at a meeting of the empowered group of ministers (EGoM) headed by P Chidambaram this afternoon. The meeting is happening after many postponements last week.

There has been growing uncertainty over whether another 1800 MHz auction will happen or not, with the telecom ministry yet to seek views of the sector regulator Trai on pricing spectrum lower in these four circles.

Sibal has said these auctions would be completed by March 2013, but unless a new price formula is worked out for the four circles in question, how will the auction process move forward?

Minister Kapil Sibal has said these auctions would be completed by March 2013, but unless a new price formula is worked out for the four circles in question, how will the auction process move forward?

Since Trai has already indicated it is not in favour of pricing spectrum any lower than the Rs 14,000 crore reserve price it recommended for the first round of auction, there is really very little Sibal can do other than sending a fresh reference to TRAI.

If this is done, the process of consultation and final recommendations could take months - perhaps breaching the March 2013 deadline.

Another 1800 MHz auction assumes even more significance now since the government has received only Rs 1,706.92 crore, against the Rs 40,000 crore it had hoped to garner from the first round of auction and as one-time spectrum fee from incumbent operators.

According to a story in the Business Standard on 2 December, the five operators who had bid for spectrum were required to fork out Rs 9,407.64 crore.

However, they were given the options to either pay the entire amount upfront or pay under a deferred scheme in which they had to pay only 33 per cent upfront and get a two-year moratorium to pay the balance in 10 equal instalments (with 9.75 per cent annual interest).

So the government received only Rs 1,706.92 crore.

Then, besides deliberating on this tricky issue of pricing of the 1800 MHz (2G) spectrum band, today's EGoM meeting is also expected to consider the way forward for the CDMA (800 MHz) band.

Since the government priced CDMA spectrum at 1.3 times the 1800 MHz band price, there were no takers for it and no auction was held.

Sibal has already indicated that the 800 MHz band spectrum could be priced lower for another auction to be held and this issue may also get referred to the TRAI again.

But there is a catch: the big GSM telcos Bharti, Vodafone and Idea have, meanwhile, petitioned the government to allow GSM operations in the "extended" 880 MHz band, which could impede any further growth of the CDMA industry. This issue may also come up for discussions in today's EGoM meeting.

A third issue related to spectrum pricing to be discussed today is a way to refund those telecom companies (like Etisalat) which lost licences after a Supreme Court order but did not participate in the just-concluded 2G auctions. They have been seeking a refund of the licence fee.