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Trai just can’t get it right PDF Print E-mail
Friday, 03 August 2018 00:00
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Even now, it wants to fix prices, not have a genuine auction

 

Despite getting its reserve prices for auctions so wrong in the past, Trai appears to be repeating its earlier mistakes, even as it seeks to make amends by slashing the reserve prices from the last time around. So, even as Trai has reduced its reserve price for the 700MHz spectrum band by 43%, to Rs 6,568 crore per MHz now, this is still too high and it is likely cash-strapped telcos won’t make a bid this time around either. The current reserve price is much lower than in the past, but there is still no sound reason for this. The last time around, Trai said the 700MHz price should be four times that of the 1800Mhz band since that was the price discovery in auctions in some European countries. A comparison with Europe made little sense since the Indian market is so different—and why not fix the 700MHz price on the basis of the 800MHz band, where an auction has taken place? It was also pointed out that Trai had got its maths wrong and the factor was around two. Instead of using the price of 800MHz as a benchmark, Trai has once again used the same European model, but with the mathematical error corrected. And, while a valuation has been done for the 5G band for the first time, the Rs 492 crore per MHz, recommended as the reserve price for the 3300-3600MHz band, has to be seen in contrast with the auctions in South Korea a month ago that fetched a mere Rs 130 crore per MHz.

The reason for this, as in the past, is that Trai seems to be trying to fix a price rather than allowing a full interplay of market forces to discover the price. Why not wait for the new telecom policy which has hinted at lower spectrum prices and annual levies? In the past, Trai has tried to fix the last discovered price as the reserve price for the next auction—this then ensures India’s auction prices keep spiraling upwards. In 2010, when 3G was auctioned, limited spectrum and irrational exuberance over the use of 3G data ensured bids skyrocketed—the Delhi bid was for Rs 663 crore per MHz versus the reserve price of Rs 64 crore. The reserve price for the 1800MHz auction in 2012 used this as the base even though telcos were looking for spectrum for voice traffic and not data—the reserve price for the 1800MHz spectrum was then fixed at Rs 554 crore per MHz. In its latest recommendation on spectrum prices, Trai has said that the reserve price for 800/900/1800/2100MHz bands should be the bid price in the October 2016 auction. Such high reserve prices, it is useful to keep in mind, don’t help the government either since a large part of the spectrum remains unsold. On average, 38% of all spectrum put on auction since 2010 has remained unsold; the figure was as high as 67% in 2012, 100% in 2015 and 59% in 2016. Chances are the next auction will give similar amounts of unsold spectrum.

 

 

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