Sale of 4G spectrum completed, minimum price lower than recommended by TRAI

Posted by Aashish Aryan | New Delhi |

Updated: December 17, 2020, 7:19:45 am





Sale of 4G spectrum completed, minimum price lower than recommended by TRAIThe new round of auctions is likely to boost government revenues at a time when inflows from other sources such as direct taxes, indirect taxes such as goods and services taxes have declined sharply due to restrictions to prevent the spread of Covid19.

The Union cabinet approved the sale of 2251.25 MHz frequency over seven frequency bands at a minimum price of 3.92 billion rupees on Wednesday.

These auctions only apply to 4G services, as the Department of Telecommunications (DoT) has not yet finalized the frequency bands for auctioning 5G frequencies.

The call for applications from telecommunications service providers will be published later this month, and the government hopes to complete the sale by March 2021, Telecommunications Minister Ravi Shankar Prasad said.

The new round of auctions is likely to boost government revenues at a time when inflows from other sources such as direct taxes, indirect taxes such as goods and services taxes have declined sharply due to restrictions to prevent the spread of Covid19.

Incidentally, the minimum price for the spectrum auctioned in this round – in the 700, 800, 900, 1,800, 2,100, 2,300 and 2,500 MHz bands – is below the recommendations of the Indian Telecommunications Regulatory Authority (TRAI), which were accepted by Digital Communications Commission (DCC), the highest decision-making body of the DoT.

On December 20, 2019, the DCC approved the sale of 8,300 MHz spectra in 22 licensed frequency access (LSA) or telecommunications circuits. It then decided to accept all of TRAI’s recommendations, including keeping the minimum price at 5.22 billion rupees.

The reduced price for frequencies corresponds to the demands of the three large private telecommunications service providers, who had expressed reservations about the minimum price of 5.22 billion rupees accepted by the DCC. Of the three, Bharti Airtel and Vodafone Idea (Vi) had stated that they would not be able to bid for frequencies in the new auctions due to the high reserve prices.

Both providers are under pressure following the October 2019 Supreme Court decision on adjusted gross income (AGR). The court ruled that Bharti Airtel and Vi must pay long-pending AGR fees, the penalty for non-payment in recent years and the interest for penalty for non-payment. Bharti Airtel owes DoT more than Rs 43,000 crore, of which it has so far paid almost Rs 18,000 crore, while Vi owes more than Rs 58,000 crore, of which it has paid almost Rs 6,900 crore.

Along with the price, the entire spectrum offered has also been reduced by more than a third. However, the DoT has set its hopes for good money with the auction. In January of this year, DoT Secretary Anshu Prakash said he hoped the TSPs would bid for frequencies in the 4G band because “telecommunications operators need frequencies”.

“I think we should be able to sell it. Their services are expanding, their networks are expanding. There should be good competition if you bid for it. I’ll wait and see, ”he said.

The last frequency auctions took place in 2016, in which the government offered 2,354.55 MHz at a minimum price of 5.60 billion rupees. However, the government was only able to sell 965 MHz, which is about 40 percent of the spectrum available for sale. The total value of the bids received at that time was 65,789 rupees.

The validity of the spectrum sold in these auctions along with the other terms from the 2016 auctions was kept unchanged at 20 years, Prasad said. Telecommunications Service Providers (TSPs) and other bidders can choose to pay the entire bid amount upfront or a specified amount now and the balance in 16 equal annual installments after a moratorium of 2 years.

Under the deferred payment plan, bidders can now pay 25 percent of the bid amount and the rest later for the sub-1 GHz bands of 700, 800 and 900 MHz.

In the over 1 GHz bands with 1,800, 2,100, 2,300 and 2,500 MHz frequency bands, bidders have to pay 50 percent in advance and can choose to pay the rest in equal annual installments. However, the successful bidders have to pay an EGR of 3 percent as frequency usage fees without wired services.

For the 2020-2021 Union budget, the government had aimed to collect 1.33 billion rupees from telecommunications services. These include frequency auctions, AGR payments and income from other statutory fees.

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