Government will have to cut 700 MHz base price, say experts

PRAVEENA SHARMA | Wed, 3 Feb 2016-08:15am , New Delhi , dna

GSMA terms the telecom watchdog's valuation of the spectrum band as "unrealistic"; one expert says it could be slashed by as much as 20-25%

After the outcry of the Indian lobby body Cellular Operators Association of India (COAI) on the exorbitant pricing of spectrum in the 700 megahertz (MHz) frequency band, international mobile operators' representative organisation GSM Association (GSMA) also on Tuesday termed it "unrealistic" and telecom experts said the government had "no choice but to cut the price".

Hemant Joshi, partner, Deloitte Haskins & Sells LLP, told dna the government would have to come out with a "fair and workable price".

The government has no choice but to cut the base price, which is unrealistic and not reflective of National Telecom Policy 2012 (NTP 2012) and Digital India objectives. They should come out with a fair and workable price and time it (the spectrum auction) in a way that everybody (telecom operators) can participate in the auction, or else a few of them (operators) will corner the spectrum (in the efficient 700 MHz band)."

The NTP 2012 and Digital India programme aims to provide connectivity to all in affordable, secure and reliable manner. Last week, the Telecom Regulatory Authority of India (Trai) came out with its recommendations on spectrum pricing for the forthcoming auction, where it has valued the airwaves in 700 MHz band at a base price of Rs 11,500 crore per MHz.

G Krishna Kumar, Bengaluru-based telecom professional, believes the sector regulator had intentionally set the price high so that it had the margin to further negotiate the price.

"As in the past, the Trai proposes a high base price for the auction, and after the uproar from the telecom companies (telcos), reduces it. Eventually, the reserve price could be reduced by 20-25%," he said.

Krishna Kumar said globally 700 MHz-based data services are being pursued mainly by countries that have matured data subscribers like the US, Germany, Japan or Australia.

According to him, leading service providers like T Mobile and Telstra are aggressively using this spectrum to bolster their data services.

"The benefits of 700 MHz spectrum, also called as the digital dividend spectrum, are very high, offering 3-4 times coverage area. They can be very useful for the rural areas," said the telecom expert.

He sees a challenge in the mass adoption of this spectrum band because currently there are only a few high-end phones supporting 700 MHz.

Deloitte Haskins and Sells's Joshi believes the four times multiple valuation of the 700 MHz band spectrum, based on the discovered price of 1800 MHz in the last auction, did not make sense at a time when the balance-sheets of most telcos were stretched and realisations from voice and data services dipping.