The Cabinet led by Prime Minister Narendra Modi on Wednesday has cleared the proposal for telecom spectrum auction in various bands, likely to be conducted in next two months.

Mobile users can hope to get better quality of services and access to high-speed data, with the Cabinet approving the biggest-ever spectrum auction. While the Telecom Regulatory Authority of India (TRAI) has been asked to review the spectrum usage charges (SUC), the Cabinet gave its nod for crucial aspects, including the pricing and timing of the sale.

The auction is expected to generate over ₹5.3 lakh crore for the Centre and, at the same time, allow operators to accumulate more spectrum, a critical ingredient to their plans to offer bandwidth-guzzling services, such as video-on-demand and live television.

This auction will also determine the future market leaders in 3G and 4G services as Airtel, Vodafone, Idea Cellular fight it out with Mukesh Ambani’s Reliance Jio.

The auction is expected to start in September though the spectrum charges issue still remains unresolved. With TRAI and the Department of Telecom (DoT) differing on the issue, the Cabinet has asked the regulator to take a fresh look at it. There was a controversy around the SUC because on the one hand Reliance Jio was paying SUC at 1 per cent, while others — including Bharti Airtel, Vodafone and Idea Cellular — were paying more than 4 per cent.

Briefing the media after the Cabinet meeting, Finance Minister Arun Jaitley said after consultations, and considering the opinion of the Attorney-General, it was decided that all documents be sent to TRAI again.

“The finalisation of spectrum auction, which was pending, has been approved. The main issue of pricing of SUC has been also discussed,” said Jaitley.

According to government sources, TRAI is likely to give its recommendation in a month’s time to ensure the auction takes place at the earliest. Even if there is a delay, it may not delay the auction because in 2014 auctions were held before the Centre could finalise the usage charges.

This time there will be a total of 2,142 MHz put up for auction in the major bands including 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz and 2500MHz.

While the reserve price of the 700 MHz band –– the most expensive –– has been fixed at ₹11,500 crore per MHz, TRAI has recommended the reserve price of 1800MHz at ₹2,873 crore.

For spectrum in the 900 MHz band, 800 MHz band, 2100 MHz band and 2300 MHz band, the reserve price was fixed at ₹3,341 crore, ₹5,819 crore, ₹3,746 crore and ₹817 crore, respectively.

The Cabinet has also decided to revise the lock-in period on sale of equity by telecom players to one year instead of three earlier.

“This will improve ease of doing business and also encourage fair competition among the telcos and new comers,” a government official said.

Lock-in period

The lock-in period of three years was introduced to prevent fly-by-night operators from making windfall gains by selling their equity soon after acquiring spectrum. However, this was relevant when the Centre was allocating spectrum cheaply on a first-come, first-served basis.

The rules have now been relaxed because the lock-in may not be relevant when 100 per cent FDI is allowed in the telecom sector and anyone can participate in auctions.

The Telecom Commission (TC) had proposed that companies winning spectrum in higher frequency bands — above 1GHz like 1800 MHz, 2100 MHz, 2300 MHz — should make 50 per cent upfront payment and the rest in 10 years after a two-year moratorium. Earlier, companies were given the option to make 33 per cent upfront payment.

For spectrum below 1GHz band, such as 700 MHz, 800 MHz, 900 MHz, companies will be required to pay 25 per cent and the rest in 10 years after a two-year moratorium. There has been no change.

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