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DoT decides against extending spectrum lease to 30 years, keeps it at 20

Telcos will have to remain content with a 20-year spectrum lease as the Department of Telecommunications has decided not to extend the same to a 30-year period.

In a set of telecom sector reforms announced in September 2021, the Union Cabinet had approved increasing the lease period of spectrum acquired in future auctions to 30 years. However, in the last 5G spectrum auction and the upcoming spectrum auction starting June 25, DoT has not modified the lease period and kept it at 20 years.

The reasons for not switching to a 30-year spectrum tenure can be attributed to expensive valuations for the operators as well as potential loss of revenue even for the government compared to the auction-determined price after the 20-year period, officials said. Further, owing to the changing pace of technology, officials said a spectrum period of 15 to 20 years is considered optimum.

In September 2021, the government approved several structural and process reforms for the telecom sector to address liquidity needs and boost growth, competition, and consumer interests. The thought process behind the government in changing the spectrum tenure to 30 years was to encourage investments in the sector, pave the way for liquidity, and give a sense of policy certainty.

In fact, the Telecom Regulatory Authority of India (Trai) in its recommendations on 5G spectrum auctions had said that the reserve price for 30 years should be equal to 1.5 times the reserve price of spectrum allocation for 20 years.

Trai had said the valuation of spectrum for the increased allocation period of 30 years should be proportionately higher than the valuation of the same spectrum for an allocation period of 20 years.

“After arriving at the reserve price by conducting the valuation exercise for an allocation period of 20 years, the reserve price is to be proportionately increased to reckon for the increased duration of 30 years,” Trai had said.

However, DoT did not go ahead with Trai’s recommendations owing to affordability concerns cited by telcos, and issues about right valuation of spectrum.

“The extended tenure does not necessarily mean that spectrum will retain same value for next 10 years,” Jio had told Trai during a consultation around pricing for 5G spectrum. “Thus, the spectrum tenure extension should not amount to additional valuation of spectrum. Any upward escalation of spectrum valuation on this ground will be tantamount to negating the Cabinet reforms at implementation level,” it had said.

Lately, telcos have sought a 5-6 year interest-free payment gap or moratorium on the spectrum bought in auctions in 2025 and beyond. The operators want that they pay for only 14-15 years in equal, annual installments.

The operators have told Trai that such a moratorium is needed on spectrum bought in auctions from next year because they have incurred huge capex in rolling out 5G services, which they are yet to monetise. Further, they need to keep on investing in their networks. Financial Express

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