Uncertainty Over 1800 Or 900 MHz Band Allotment

Telecom operators want to know when the government will actually allot spectrum to the bidders who win it in 1800 or 900 MHz bands in the upcoming auctions and whether the payment for this spectrum needs to be made immediately. As per the current auction timeline, the Department of Telecom (DoT) plans to hold auctions for 1800 and 900 MHz spectrum bands (both are now used for GSM operations) from 11 March and begin auctions for the 800 MHz spectrum band (used for CDMA) two days after the first auction gets over.

Today was the last day for telcos to seek clarifications from the DoT on these auctions and their prime concern seems to be the timing of the allotment of 1800 and 900 mhz spectrum, payment timelines and whether the spectrum for CDMA is liberalised or not.

So one of the questions being asked is will the spectrum allotment be done immediately or will it happen at the time of license renewal of each telco? Last week, Vodafone India sent a letter to the DoT saying the spectrum it won in the November auctions had still not been physically allotted to it and this perhaps is causing concern to all telcos who won spectrum in November.

Tata Teleservices, a dual technology player, has not been allotted the GSM spectrum it won in 39 districts across nine telecom circles in 2008! The company has already paid for this spectrum.

Also, this question is quite pertinent since the auctions for the GSM band (where both 1800 mhz and 900 mhz frequencies are being used now) will be conducted on the assumption that all of the 900 mhz spectrum which is currently held by incumbents is freed up at the time of auctions. Telcos are already up in arms against refarming of 900 mhz spectrum, saying surrendering this spectrum band could lead to massive disruption in telecom services.

Then, the CDMA operators want clarity on whether the 800 mhz spectrum being offered this time is liberalised or not. Liberalised spectrum would mean it can be used to offer any kind of telecom services, something not permitted right now. The government has earlier said 1800 mhz spectrum so obtained will be liberalised. The CDMA players like Tata Teleservices also want to know if the existing spectrum they hold in the 800 mhz band can be liberalised.

Yet another important query the telcos have raised is whether the government expects payment of spectrum fee immediately upon auctions getting over or will it accept the money at the time of license renewal. If telcos are allowed tro pay up when licenses come up for renewal, will they be charged extra – SBI’s prim lending rate over and above the auction determined price?

The telcos are also curious about whether DoT will announced guidelines for Unified Licenses before the auctions.

The queries raised by telcos this time need to be taken seriously by DoT, specially since the November auctions had seen dismal participation by telcos. 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 percent of the spectrum on offer was bought. The actual realisation of the government was much lesser, since it has permitted deferred spectrum payments.

Already, DoT seems to have corrected some of its past follies. So even though it has made participation by incumbent telcos 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), 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.

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 effective date.