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TRAI may go for 50% cut; recommendations later this month

With around 60% spectrum remaining unsold in the auctions held in March 2021, the Telecom Regulatory Authority of India (TRAI) seems to be taking no chances this time. The regulator may cut the reserve price for 5G spectrum by 30-50% against what it had recommended in 2018, sources told FE.

TRAI is expected to submit its recommendations on the reserve price and other issues relating to the auctions later this month.
A cut of this quantum would mean for a 100 MHz pan-India 5G spectrum, operators may have to shell out somewhere in the range of Rs 24,600 crore-34,440 crore, against Rs 49,200 crore going by the reserve price recommended in 2018.

Effectively, the cut would work out even lower for the operators because this time the tenure of auctioned spectrum with the operators would be for 30 years, against 20 years in earlier auctions.

In 2018, TRAI had submitted the reserve price for 5G band spectrum in the 3300-3600 MHz band, but auctions were not held for it.

According to sources, TRAI is yet to take a final call on the matter but there is broad consensus around the cut. The industry, however, has been seeking a cut of around 90% in the reserve price, apart from other demands such as a moratorium of 5-6 years on upfront payment, followed by a 20-24 year period to pay the full amount through deferred instalments.

So far, after every auction operators are required to pay a certain portion of the bid amount depending on the spectrum bands. This is followed by a two-year moratorium after which they are required to pay the remaining over 16 years in equal instalments. The upfront payment has ranged between 25%, 33% and 50% of the bid amount depending upon spectrum bands.

The government is also in favour of reserve prices coming down as it had come out with a revival package for telecom operators in September last year and wants to further deepen the reforms through pricing correction so that 5G services take off in the country in a timely manner.

Both the TRAI and the government are being doubly careful this time since the spectrum demand-supply scenario has totally changed in the last few years, especially after the March 2021 auctions. There are only three telecom players right now and one of them is financially weak. The operators have enough spectrum in the 4G band and by optimising that they can start providing 5G services once the ecosystem is more developed. In fact, Bharti Airtel has demonstrated 5G services through such spectrum optimisation. As a result, if the pricing does not suit the industry, it will be in no hurry to buy 5G spectrum. The Financial Express

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