Analyst Commentary

• The Telecom Commission has come back to TRAI with questions on its spectrum auction proposals.
• While it may accept TRAI's proposals at a later stage, there is a possibility that it may water them down and accept some of the arguments made by operators.

India's Telecom Commission has asked TRAI to respond to four questions related to its recent proposals on spectrum auctions:

• the plan to auction only one slot—5 MHz of GSM 1800 spectrum—in the near term;
• how the base price for future spectrum auctions was arrived at and what the impact on retail tariffs would be;
• roll-out obligations associated with future auctions; and
• re-farming plans for 800-MHz and 900-MHz spectrum.

According to the Economic Times, the Commission decided not to endorse TRAI's proposal after taking into account the views of its members and the broader industry. India's mobile operators have lined up to criticise the plans on a number of grounds, particularly the elevated base price of spectrum, roll-out obligations and spectrum re-farming plans. Vodafone said separately that the re-farming plans would force it to write down its 900-MHz investments and allocate considerable investments in 1.8-GHz deployment—money that could have been used to improve its Indian coverage. The group also criticised plans in the new National Telecom Policy to extend licences without spectrum, which would break the concept of continuity.

Our Take

The Telecom Commission's decision not to wave through TRAI's recommendations is moderately good news for operators. While it may accept TRAI's proposals at a later stage, there is a possibility that it may water them down and accept some of the arguments that operators are making. There should be more clarity on these four issues within the next few weeks, although uncertainty still surrounds the issue of when the cancelled 2G spectrum, mostly in the 1.8-GHz band, will be auctioned. This is partly contingent on the Supreme Court's response to the government's question of whether basic service licences issued in 1994 and 2003-07 and 35 dual-technology licences granted to Reliance Communications, Tata Teleservices, Shyam Teleservices and HFCL were illegal. The government is questioning the legality of these licences as, like the 122 cancelled licences, they were granted without an auction. Both Telenor and Sistema have called for auctions as soon as possible and are edging closer to seeking compensation from the Indian government through international arbitration.