Spectrum Auctions 2015

As readers may be aware from our previous post, the Department of Telecommunications, Ministry of Communications and Information Technology, Government of India (“DoT”) had put up spectrum in 4 bands of 800 MHz, 900 MHz, 1800 MHz and 2100 MHz, spread across the 22 telecom circle of the country. The auction process concluded last week after fierce bidding by eight telecom players over 19 days and 115 rounds.  Our previous posts on the timeline and schedule for the spectrum auctions can be accessed here.

The telecom players which were in the fray to bag spectrum from the auction included Airtel, Vodafone, Idea Cellular, Reliance Communications, Reliance Jio Infocomm, Tata Teleservices, Aircel and Uninor. These operators participated in the auction process comprising of a total of 465 MHz of spectrum across the four bands (103.75 MHz in 800 MHz band, 177.8 MHz in 900 MHz band, 99.2 MHz in 1,800 MHz band and 85 MHz in the 2,100 MHz band ).

In what could be a further boost to the Government, the Supreme Court has lifted a restraint order and allowed finalisation of the auction result. According to reports, these auctions fetched the Government approximately INR 1.09 lakh crore, which translates into INR 10,900,000,000 billion. The Supreme Court direction implies that the Government could have at least INR 28,000 crore from the total auction money before the end of the current financial year.

Earlier, a bench headed by Justice Dipak Misra had on February 26, 2015 allowed the scheduled commencement of spectrum auctions, but directed that the results should not be finalised without its approval. This approval came on March 26, 2015, when the bench observed that it may not be proper to block so much of money, when the Government has agreed that the final allocation will be subject to orders passed by the Supreme Court.

Some of the key highlights of the auction were:-

• Bharti Airtel, Vodafone and Idea Cellular retained their 900 MHz spectrum holdings;
• Reliance Jio Infocom managed to win CDMA band spectrum;
• Although Reliance Communications lost in three telecom circles, but it became India’s first and only operator with a nationwide footprint of the contiguous 800 MHz spectrum;
• Uninor did not win spectrum in any telecom circle;
• Aircel only participated in the bidding process for 1800 MHZ spectrum band, since it was disqualified from bidding for any new spectrum; and
• The Maharashtra circle generated the most revenue, accounting for INR 10,822 crore for 14 MHz of spectrum.

The results of the bidding process, as issued by the DoT can be accessed here and the DoT’s notice regarding the amount due from the telecom players is here. 

Spectrum Auctions Deferred to March & Cabinet Approves 3G Spectrum Base Price

In a recent decision, the Department of Telecommunications (“DoT”) has deferred the spectrum auctions, which were earlier slated to begin from February 25 to March 4, 2015.

In the upcoming auctions, the government would be putting for sale spectrum in the bands of 800 MHz, 900 MHz, 1,800 MHz and 2,100 MHz. The decision to postpone the auctions seems to have been taken earlier this week since the base price for the 3G auction is yet to be finalised and approved by the Government. The timeline for submission of applications, mock round of auctions etc. has also been deferred.

As per media reports in December 2015, seven licences each of Idea Cellular and Reliance Communications, four licences of Bharti Airtel and six licences of Vodafone will complete their term of 20 years, pursuant to which they would have to be renewed.

Additionally, in another development this week, the Union Cabinet has approved a base price of INR 37.05 billion for each unit of 3G spectrum in the 2,100 MHz spectrum band. The approved base price had been recommended by the Telecom Commission earlier this month. Our earlier post on the price fixed by the Telecom Commission can be accessed here.

The Telecom Commission recommended reserve price is around 11 per cent higher than what operators had paid during the spectrum auctions held in 2010 and approximately 36 per cent higher than the price of INR  27.20 billion recommended by the Telecom Regulatory Authority of India.

The Telecom – Defence Spectrum Swapping Receives Cabinet Nod

The resolution of the long pending spectrum swapping issue between the Department of Telecommunications, Ministry of Communications and Information Technology (“DoT”) and the Ministry of Defence (“MoD”) has received the approval of the union cabinet. The cabinet approved the swapping of 15 MHz of the 2,100 MHz spectrum band used for 3G services, presently with the MoD, in return for a release of an equivalent amount in the 1,900 MHz spectrum band by the DoT. Our earlier post on the auctions approved by the Cabinet can be accessed here.

However, the DoT is of the view that it would take a year to harmonise the 15 MHz spectrum, conceding that the same would not be available for the forthcoming auctions proposed in February, 2015. The 15 MHz spectrum would only be available for sale after technical issues are sorted out, which process can take at least a year. Harmonisation refers to making spectrum contiguous, or continuous, for both the defence as well as the telecom services. This has the effect of increasing the efficiency of spectrum, without any added costs. The Telecom Commission, DoT earlier this week, while approving the base price for 3G spectrum, also signalled that only 5 MHz of 3G spectrum would be put up for auction. Our earlier post in this regard can be accessed here.

As per news reports, the telecom operators are of the view that prices of 2,100 MHz spectrum would be unprecedentedly high as only 5 MHz would be up for auction along with the 2G airwaves next month.

Additionally, the cabinet has also earmarked 49 slots for defence use in the 3 MHz – 40 GHz spectrum bands, including 9 for exclusive defence use and 31 for defence use along with other agencies for sectors such as space, broadcasting and aviation, which are 50 km around border areas (categorised as defence interest zones). This would constitute as the defence band. However, for the remaining 9 slots, certain issues remain to be resolved between various ministries. In the defence interest zones, the spectrum would be used by telecom operators during peace time, however during war or hostility time, the areas would come under the MoD’s jurisdiction.

Regardless, the decision of the cabinet puts an end to long tussle between the DoT and MoD on the defence band and swapping of spectrum. The spectrum swapping was in-principle agreed between the DoT and the MoD in December, 2014. Our earlier post on the agreement arrived at can be accessed here.

Further, news reports indicate that the DoT is considering a Swachh Bharat cess of 0.1 per cent on the service tax currently levied on telecom services; however a final decision will be based on inputs from various ministries. It is also expected that after the spectrum auctions next month, the government will announce the re-worked guidelines for mergers and acquisitions and spectrum sharing and trading, to bring about the much-needed consolidation in the telecoms sector.

Spectrum Sharing Guidelines Likely Only After Spectrum Auctions

The issuing of the guidelines for sharing of spectrum is likely to be delayed further and the same may be issued after the forthcoming spectrum auctions next month. The guidelines would be finalised and are likely to be issued after the auctions, upon finalisation.

The finalised guidelines were earlier supposed to be issued in December last year, however the same have not yet seen light of the day. Further, even the recent Notice Inviting Applications issued by the Department of Telecommunications (“DoT”) for the upcoming auctions in February, 2015 had indicated the guidelines for these would be notified in due course.

As per news reports, the DoT is not keen on announcing the guidelines before the auctions as this might prevent companies from aggressive bids is causing a revenue loss to the exchequer. However, the Telecom Commission, the highest policy making body of the DoT, is yet to take a final decision on the issue. Our previous post on the issue of spectrum sharing guidelines may be accessed here.

The Telecom Regulatory Authority of India (“TRAI”), in July 2014, recommended that sharing of spectrum in all bands (2G, 3G and 4G) should be allowed, subject to the condition that all operators have spectrum in the same band. The TRAI, however, specifically provided for a prohibition on leasing of spectrum. Additionally, the DoT plans to allow sharing of spectrum only between entities having 2G spectrum in the same service area and not between operators with spectrum in different service areas. Please refer or previous post on the recommendations issued by TRAI here.

DoT is in the process of finalisation of guidelines for inter-operator swapping. The said swapping is regardless of the type of allocation to ensure contiguity. The DoT has formulated a committee for the identification of issues concerning the industry, resolution of the issues and framing appropriate guidelines.

Additionally, the DoT is in process of reviewing the policy relating to licensing requirements for import of low powered wireless devices.

Depart of Telecom seeks Defence and Finance Ministries’ Nod for Spectrum Auctions

The Department of Telecommunications (“DoT”) has finalised the draft note for the spectrum auctions early in 2015 and the same has been sent to the Ministry of Defence and the Ministry of Finance for vetting.

As per news reports, the Government plans to auction some amount of 3G spectrum with spectrum in the bands of 800 MHz (used by CDMA operators), 900 MHz and 1800 MHz being used by Airtel, Vodafone, Idea Cellular and Reliance Communications for 2G services across India.

The Government is expected to rope-in revenue of at least INR 93.55 billion from auctioning spectrum in the three bands of spectrum and also expects to raise additional INR 50 billion from auction of 3G spectrum in the 2,100 MHz band, provided it is vacated by the Defence Ministry and is consequentially put up for auctions.

Recently, the long pending contentious issues between the DoT and Defence relating to auction of 3G spectrum such as (a) vacation of spectrum in the 2,100 MHz band and the Defence Ministry in-principle agreeing to vacate 5 MHz of spectrum across 17 out of 22 telecom services circles, and (b) swapping of 15 MHz spectrum in the 2,100 MHz band with a likewise amount in the 1,900 band to be released by the Defence Ministry and DoT respectively, have been sorted out. Please refer our previous post on the resolution between the Government departments here. However, there still remain certain technicalities to be clarified and cleared for the arrangement between the DoT and the Ministry of Defence to be effectively implemented. For this reason, the DoT is taking views of the Ministry of Defence on the note on spectrum auction, before the same could be sent to the cabinet.

It is expected that the spectrum bands would be put up for auction in the forthcoming auctions scheduled to be held in the month of February 2015.

Breakthrough in the Telecom Dept – Defence Spectrum Tussle; 3G Swap Agreed

In a pivotal breakthrough in the long-standing spectrum negotiations between the Department of Telecommunications (“DoT”) and the Ministry of Defence (“MoD”), the swapping of high-speed 3G airwaves has now been confirmed. According to recent media reports, the MoD has in a letter to the Telecom Regulatory Authority of India (“TRAI”) confirmed its willingness to swap 15 MHz of 3G spectrum in the 2,100 MHz band with an equal amount of spectrum in the 1,900 MHz.

Earlier, the MoD had written to the DoT about the possibility of the swap. However, now it is understood that simultaneous auction for 2G and 3G spectrum may be possible, thereby eliminating the artificial scarcity. Please refer our previous post Department of Telecom May Conduct Simultaneous Auctions for 2G & 3G.

The TRAI had earlier this month issued a consultation paper seeking comments / inputs for the valuation and the reserve price of spectrum in the 2,100 MHz band. In the said letter, which is in response to the TRAI consultation paper, the MoD has agreed in principle to vacate and release 15 MHz (1,939-1,954 MHz of spectrum) in 2,100 MHz band in lieu of the same amount of commercial EVDO spectrum, (i.e. 1,900-1,907.5 MHz and 1,980-1,987.5 MHz). This can be seen as a rebuttal to an extract of the TRAI consultation paper, where DoT was quoted stating that the simultaneous auctions for 2G and 3G may not be possible. A Memorandum of Understanding to this effect is likely to be signed between the DoT and MoD.

The MoD has categorically agreed for the swap proposal only and with regard to the release of the other 5 MHz block of 2,100 MHz spectrum in 17 service areas, the MoD has clarified that the same would be done only upon completion of the alternate optic fibre network. This is in terms of the Memorandum of Understanding dated May 22, 2009 between the DoT and MoD.

The Telecom Commission, earlier this month, had decided on the base price in relation to the bands for 2G spectrum for the upcoming auctions. Please refer our earlier post on the Telecom Commission’s decision on the base price here. The cabinet approval for 2G spectrum base prices is likely to be issued this month.

As per press reports, a cabinet note has been circulated by the DoT, which seeks notification of the defence band and the defence interest zone, essentially the frequency bands for the exclusive use by defence forces of the country.

With the issuance of such letter, auction of sufficient quantum of spectrum is assured to the respite of the telecom operators and consumer. According to recent press reports the TRAI was expected to give recommendations on 3G spectrum base price by early January. However, some reports also suggest that it is expected that the process of TRAI recommendations on the base price for 2,100 MHz spectrum would be completed by the end of this month and the cabinet approval in about two to three weeks time thereof.

Telecom Commission Approves Base Price for 2G Spectrum

The Telecom Commission, the highest decision making body of the Department of Telecommunications (“DoT”), in its recently concluded meeting on December 8, 2014, has inter alia recommended the base price for 2G spectrum.

Earlier, the Telecom Regulatory Authority of India (“TRAI”) had recommended the base prices for 800 MHz and 900 MHz spectrum bands, for use in 2G services in October (our previous post on the same can be accessed here). However, the same were sent back to the TRAI by the Telecom Commission for reconsideration (our post on this development may be accessed here). The TRAI, upon re-consideration of the issue reiterated and reaffirmed the prices suggested earlier.

The base prices recommended by the Telecom Commission are on the higher side as compared to those recommended by the TRAI for corresponding bands. A table providing the comparative base prices is as below:-

Spectrum Band	Quantum of Spectrum for Auctions (Approximate)	TRAI Recommended Base Price (in INR Crore)	Telecom Commission Recommended Base Price (in INR Crore)
900 MHz	184 MHz	3,004	3,693
1,800 MHz	104 MHz	2,138	2,191

Besides the recommendation on the base price, the Telecom Commission has also asked the DoT to reconsider its stand on the issue of not taking back 900 MHz spectrum band from the state-run telecom Bharat Sanchar Nigam (“BSNL”). However, such spectrum would not have any bearing on the upcoming auctions. As per media reports, BSNL is willing to relinquish its 900 MHz band of spectrum, but on the pre-condition that the government compensates it with nearly INR 2,000 crore to meet additional capex and network re-engineering costs. No decision was taken in this regard by the Telecom Commission.

Further, the Telecom Commission has also asked the DoT to re-examine the recommendations of TRAI on the issue of an extended GSM band with the unused 800 MHz spectrum currently used by CDMA players. Although, the DoT has repeatedly rejected this TRAI suggestion, but the Telecom Commission wants DoT re-examine the same.

The base prices having been accepted by the Telecom Secretary, Mr. Rakesh Garg, recommended by Telecom Commission will, now be taken to the cabinet for its approval, upon being approved by the Minister of Communications and Information Technology, Mr. Ravi Shankar Prasad.