In a blow to telecom operators, an internal committee of the Department of Telecom has rejected the telecom regulator's recommendation to conduct the next round of auction only when there is enough spectrum.

The committee has said that there is no visibility of when additional spectrum will be vacated by the defence and hence there is no point in stalling the sale of what's already available.

The telecom operators, backed by TRAI, had argued that the auction should not be held till the Government is able to find enough spectrum to ensure continuity of service for existing players.

Availability of fresh spectrum

To make fresh spectrum available for mobile services, the Telecom Regulatory Authority of India had suggested that the Government should ask defence forces to vacate spectrum in the 2,100 MHz band. In addition, it had proposed that BSNL should be asked to surrender 1.2 MHz spectrum in the 900 MHz band.

However, the DoT panel has rejected these proposals on grounds that while the defence will take time to vacate spectrum, asking BSNL to surrender airwaves may have legal implications.

The committee said that the proposed auction scheduled for early next year should not be linked to the availability of fresh bands. The views of DoT panel along with the recommendations of TRAI will be put before the Telecom Commission for a final decision.

Telecom licence renewal

There are 11 circles in the country where operators, whose licences are due for extension in 2015-16, face the risk of business disruption, including potential closure, unless they win back expensive spectrum in the 900 MHz band.

This is because the amount of spectrum being put up for auction in January is less than the 2G spectrum currently being used by operators whose licences are due for renewal.

For example, in Maharashtra, Vodafone and Idea Cellular together have 14 MHz in the 900 MHz band, which will be put up for auction. If either of these operators is unable to win back the existing holding then there will not be enough spectrum in the 1800 MHz band to fall back on.

The Chief Executive Officers of four telecom companies had recently written to the Government that conducting the auction now could lead to a crisis for the sector and impact subscribers, operators, their employees and other stakeholders such as lenders.

“Inability of such operators to win back 900MHz spectrum in these circles (a distinct possibility in view of the fact that the proposed auctions are likely to be open to all bidders), will either lead to the market leaders in these circles shutting down operations or being forced to curtail operations due to inadequate spectrum,” the joint letter written by the CEOs to the Communications Minister and the Prime Minister stated.

Supply side issues

TRAI had also highlighted that supply side issues will affect not only the proposed auction of spectrum arising from expiry of licences in 2015-16, but will also continue to have a negative impact on all subsequent auctions of spectrum becoming available from future expiry of licences.

It had warned against the dangers of going ahead with the forthcoming auction without resolving the spectrum constraints.

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