Spectrum auctions: Govt makes amends, removes cap on incumbents

New Delhi: The second round of spectrum auctions is scheduled to begin on March 11 and the Department of Telecom (DoT) seems to have learnt several lessons from the lukewarm response it received in the first round conducted in November 2012.

In that auction, not a single CDMA telco participated, the GSM telcos which participated did not bid in the four most expensive circles of Delhi, Mumbai, Karnataka and Rajasthan. This kind of reluctant participation by telcos coupled resulted in the Government managing to raise just a quarter of its Rs 40,000 target in the first round of auctions when only 35% of the spectrum on offer was bought. The actual realisation of the Government was much lesser, since it has permitted deferred spectrum payments.

[caption id=“attachment_609228” align=“alignleft” width=“380”] DoT has removed the cap on maximum number of spectrum blocks an incumbent telco may bid for. Reuters[/caption]

So this time, some things have been amended. Though participation of incumbent telcos has been made mandatory, DoT has removed the cap on maximum number of spectrum blocks an incumbent telco may bid for.

As per the Notice Inviting Applications (NIA) for the upcoming auctions, an existing telecom operator in a particular telecom circle may bid for as many blocks as it likes, as long as it sticks to general spectrum caps. But a new entrant or a renewal licensee must bid for at least four blocks of 1.25 mhz spectrum in either auction.

The auction on March 11 will initially be for 1800 mhz (2G) spectrum and for 900 mhz (which is also being used to offer 2G services) and thereafter auction for 800 mhz (which is the CDMA band) would be conducted.

The DoT has made another change here: it has said that all spectrum on offer through these auctions will be liberalised, which means even the 800 mhz spectrum bought through these auctions can be used to offer GSM services. This may encourage participation in the auctions.

But the bone of contention between telcos and DoT)-renewal of license-stays. The NIA clearly states that the validity period of spectrum in 1800MHz, 900MHz and 800MHz bands won in these auctions shall be 20 years from the ‘Effective Date’.

In case of 800MHz band, date of Letter of Intent (LoI) will become the effective date. In case of those telcos which want to renew their 2G licenses in the 1800MHz band the effective date would either be the preferred date of allotment indicated by a successful bidder or any date before the expiry of existing licenses in the respective service area.

This is the clause by which DoT has ensured that incumbents would be left with no choice but to participate in the auctions since otherwise their licenses will not be renewed. Last time, the country’s largest telco Bharti Airtel had shown a mere token participation, incumbents who lost licenses earlier last year did not win back all the licenses and the two Ambani brothers did not participate at all in the auction process.

The NIA also says that for successful bidders in the 900MHz band, date of expiry of existing licenses in 2014 in the respective service areas will be taken as the effecive date.