While telcos who won spectrum in the February 2014 auction have raised an alarm over not getting their spectrum eight months down the line, a different kind of storm is being kicked up within the government. Finance secretary Arvind Mayaram, who has R27,000 crore riding on auctions in the next five months – of the budget target of R45,000 crore, roughly R18,000 crore will come by way of licence fee/spectrum and microwave charges – has written to his counterpart Rakesh Garg in the communication and information technology (C&IT) ministry asking him to expedite the availability of spectrum.
“I am given to understand”, finance secretary Mayaram has written, “that there is a likelihood of Defence releasing three slots of 2x5 MHz subject, however, to resolution of the pending issues in the MoU signed by ministry of defence and ministry of C&IT in 2009”.
While the 1800MHz spectrum available with the government can possibly fetch around R2,750 crore (telcos can pay just a third of the auction price upfront as per the rules), another R6,650 crore can come from the 900MHz auction (http://www.financialexpress.com/news/column-2100-ways-to-win-the-budget/1271917). The finance ministry’s best bet – as the secretary’s letter suggests – is to get the defence forces to swap spectrum to release 3 slots in the 2100 MHz or 3G band; this can fetch around R50,000 crore in an auction, of which the ministry can get R17,000 crore upfront if it auctions all slots.
While the telecom ministry has not met its MoU commitments, it has auctioned out a sizeable portion of spectrum being used by the defence ministry in the 1800 MHz band – this might be the reason for the telecom ministry’s inability to assign all the spectrum to telcos like Bharti Airtel and Vodafone among others who paid R37,500 crore for their 1800 MHz spectrum last February.
A few days before the auction in February 2014, in fact, defence secretary RK Mathur had written a letter to his telecom counterpart, then MF Farooqui, to say the spectrum auctioned was, in places, being used by the defence forces – industry sources estimate that around a fifth of the spectrum reserved for commercial use in the 1800 MHz band is occupied by the defence; in turn, commercial users are occupying part of the 1800 MHz band that is earmarked for defence. This ensures the spectrum for telcos is available in only small discrete slots which makes it unsuitable for offering data services and therefore lowers its commercial value.
“As you are aware”, the defence secretary wrote, “this Ministry has been pressing the view that MoC&IT should not auction any spectrum in the commercial part of 2G GSM Band where there are defence assignments”. It had been noted the proposed auction of spectrum which is partially occupied by defence forces, the letter says, “would lead to interference to defence systems operating in these frequencies”.
The same issue was raised again a few days ago in a meeting between the defence and telecom ministry.
The crux of the problem, that finance secretary Mayaram wrote to telecom secretary Garg about, revolves around the MoU signed by the defence ministry and the telecom ministry to free up 65 MHz of spectrum in the 1800 and 2100 MHz bands for commercial use. According to the MoU, the defence forces were to free up spectrum subject to the telecom ministry meeting certain milestones. While one was the completion of an optical fibre network (OFN) that is already two years behind schedule and the other was to notify a ‘defence band’ as well as a ‘defence interest zone’ – the latter was to be done by June 2009 but, more than 5 years later, is no closer to being notified.
In 2011, however, more discussions were held and it was decided that both telecom and defence would equally share the 1700-2000 MHz band. According to the 2011 agreement, defence was to vacate 55 MHz in the 1800 MHz band while the telecom ministry was to vacate 20 MHz of this band for defence.
The progress has been patchy on both sides. Defence has vacated 20 MHz of the 3G band and 40 MHz of the 1800 MHz band so far. This is in excess of the 2009 MoU but less than what the 2011 agreement envisaged since defence was to vacate 55 MHz and telecom was to vacate the defence’s 20 MHz in the 1800 MHz band.
Based on the finance secretary’s letter to his telecom counterpart, it looks as if getting more spectrum released by the defence forces is proving difficult unless the issue of notification of the ‘defence band’is addressed, as freeing up three additional slots of 5 MHz in the 2100 MHz band will require alteration in the existing sharing arrangement between the telecom and defence ministries – but the defence will not have to release any additional spectrum. Also, the lack of synergy between the two ministries may prevent full assignment of the spectrum auctioned last February, and so may impact the credibility of future auctions.
* The problem revolves around the freeing up of 65 MHz of spectrum in the 1800 and 2100 MHz bands for commercial use
* The defence ministry may release3 slots of 2x5 MHz, if pending issues agreed to, in a 2009 MoU, are resolved
* The telecom ministry has auctioned a sizeable spectrum being used by the defence ministry in the 1800 MHz band
* It has been unable to assign all the spectrum to telcos like Bharti Airtel and Vodafone
* A fifth of the spectrum meant for commercial use in the 1800 MHz band is used by defence
* Commercial users are occupying part of the 1800 MHz band, earmarked for defence