Global body GSMA joins chorus against high spectrum price

After the outcry from the industry body Cellular Operators Association of India (COAI) on the exorbitant pricing of spectrum in the 700 megahertz 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 at Deloitte Haskins & Sells LLP, told the DNA newspaper 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 programmes aim to provide connectivity to all in an 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 Rs11,500 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, reduces it. Eventually, the reserve price could be reduced by 20-25 per cent," 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 the digital dividend spectrum, are very high, offering 3-4 times coverage area. They can be very useful for 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.

A statement issued by the London-based GSMA on Tuesday had its chief regulatory officer John Giusti saying "an unrealistically high reserve price" could result in lower participation in the 700 MHz band bidding.

"High reserve prices and an unrealistic predetermination of spectrum value could also reduce the willingness of potential bidders to buy the spectrum. For example, in Australia, an unrealistically high reserve price resulted in a valuable portion of the 700 MHz spectrum being left unsold and unused. Unused or under-utilised spectrum benefits neither the economy nor society," said Giusti in the statement.

The statement further asked government and telecom watchdog to keep the objective of releasing 700 MHz band airwaves while setting its price.

"We respectfully ask the Indian government and Trai to keep in mind the objectives for releasing 700MHz spectrum – one of the most promising bands to expand the reach of mobile broadband services into rural areas – in the lead-up to auctioning this critical spectrum resource. Setting reserve prices at reasonable levels will be a key to achieving the Digital India objectives, allowing operators to focus their resources on building the necessary infrastructure to deliver high-quality mobile services for Indian citizens," said the GSMA note.

In 2014 alone, the mobile industry contributed 6.1 per cent to India's GDP.