Union Cabinet approves largest-ever Spectrum Auction

Union Cabinet chaired by Prime Minister Narendra Modi on 22 June 2016 approved the sale of all available spectrum in the country. This is the largest-ever spectrum auction in the country. The move could fetch 5.5 lakh crore rupees for the exchequer, going by the reserve price. This amount is five times higher than the revenue of 1.1 lakh rupees that government earned through the auction conducted

in 2015.

Main highlights of the decision

• The auction, to be conducted in September 2016, will put up about 2000 MHz of airwaves for sale.

• It will put up 700 MHz band for sale for the first time at a reserve price of 11485 crore rupees per MHz pan-India. 700 MHz band is preferred for offering high-speed broadband services and the cost of delivering mobile services in the 700 MHz band is also approximately 70% cheaper than in the 2100 MHz band (used for 3G services).

• It has fixed a reserve price of 2873 crore rupees for the 1800 MHz spectrum, which is widely used for offering voice services

• For spectrum in the 900 MHz, 800 MHz, 2100 MHz and 2300 MHz bands, reserve prices of 3341 crore rupees, 5819 crore rupees, 3746 crore rupees and 817 crore ruppes respectively have been stipulated.

• The reserve price for 2500 MHz spectrum, which is also on the offer for the first time, be equal to that of 2300 MHz spectrum.

• Companies winning spectrum above 1GHz will need to pay 50% upfront against the 33% earlier. For the remaining spectrum, 25% would be upfront payment. The balance for both categories will be paid in 10 years after a two-year moratorium.

However, the Cabinet has, decided to refer back the issue of spectrum usage charges (SUC) to the TRAI for its recommendations. The Telecom Commission (TC) had recently recommended 3% of operator’s annual revenue as SUC for upcoming auctions. SUC is an annual fee payable by telecom operators for using airwaves.