EGoM increases quantum of spectrum to be put on the block in January

The Empowered Group of Ministers on Tuesday decided to increase the total quantum of spectrum that will be put up for auction in January.

Telecom companies will have access to 403 MHz of spectrum in the 1800 MHz frequency band compared with 298 MHz of spectrum that was made available in the previous round of auction. If this entire spectrum is sold at the reserve price, the Government will get Rs 36,385 crore.

But, according to market watchers, the 1800 MHz band is unlikely to see much demand from bidders because the Government does not have contiguous blocks of 5 MHz in all circles. This means that the spectrum given to a winning operator after the auction could be split into two or three chunks.

So, an operator could get 2.5 MHz chunk in the lower part of the 1800 MHz band and the balance in the upper part. Such an allocation would make it difficult for operators to offer data services.

While non-contiguous spectrum works for offering voice services, higher technologies need the airwaves to be bunched together. During the November 2012 auction, out of 295 MHz of spectrum, only 127 MHz was sold. No spectrum was sold in the March 2013 auction.

The EGoM also approved the Mergers & Acquisition norms but will take legal opinion on how to deal with companies that have been in operation for less than three years. The Telecom Commission had earlier decided to permit a merged entity to hold up to 50 per cent market share compared to the earlier proposed 35 per cent.

This could help large incumbent operators consolidate their footprint by acquiring smaller players. For example, Bharti Airtel, which currently has a market share of about 22 per cent, can merge operations even with the No 2 player Vodafone, which has 17.78 per cent share of the total subscribers.

But there are some dampeners in the policy. The EGoM has retained the rule that the buyer will have to pay the Government the market price for any spectrum the seller holds under the older, first-come-first-served dispensation.

For example, if Sistema Shyam were to acquire Aircel, the Russian player will have to pay the Government for the GSM spectrum held by Aircel. However, the EGoM did not take a decision on imposing a fee on companies that enter into an M&A deal before the three-year lock-in period ends. The Telecom Commission had proposed such a fee but had left it to the EGoM to take a final view.

There is also another view that since the companies concerned are being told to pay market determined price for spectrum, there is no logic in retaining the lock-in period. The Attorney General’s opinion will be taken on this issue before the policy is sent to the Cabinet for final ratification.

thomas.thomas@thehindu.co.in