India may slash 2G spectrum tenure to 10 years

India's Telecom Commission is considering plans to slash the 2G spectrum tenure from 20 years to 10 years, which means mobile carriers may potentially pay less to bid for airwaves in the country's upcoming auction.

The Economic Times reported Tuesday the commission, which is the highest decision-making body in the communications ministry, will present its proposal to the Empowered Group of Ministers (EGoM) headed by Indian Finance Minister Pranab Mukherjee. The EGoM, which makes the final call on matters related to spectrum auctions, is scheduled to have its first meeting on Jun. 5, the local business newspaper added.

A reduced tenure could bring down the reserve price of airwaves that bidders would need to fork out, the report said, referring to the upcoming 2G spectrum auction. Currently, airwaves sold through auctions or issued to companies with mobile permits are valid for a 20-year period.

Earlier in April, the Telecom Regulatory Authority of India (TRAI) had proposed, among other recommendations, increasing the base price to 36.2 billion rupees (US$678 million) per megahertz (MHz) in the 1800MHz band--a figure about 10 times the price at which 2G licenses were allocated in 2008. India in February called for a re-auction of the country's 2G spectrum after revoking all 122 license agreements, saying the government had erred in issuing licenses on a first-come-first-served basis.

TRAI's recommendation led to public outcry from Indian telco operators and international industry bodies.

Telecom Secretary R. Chandrasekhar told The Economic Times that the commission had asked TRAI to work out the reserve price if the spectrum was given for a 10-year period. He said reducing by half the period of possession of airwaves did not imply the reserve price would be 50 percent of the amount recommended by TRAI. "This is one of the options that will be presented to the EGoM," Chandrasekhar said.

The commission said a 10-year tenure would allow mobile phone companies to raise the requisite funds to pay for the airwaves.

"The [Telecom Commission] has rejected TRAI's proposal to allow companies stagger their payments for spectrum bagged through the bidding process," said another telecom ministry official. "Under this scenario, most operators may not be raise funds for an upfront payment. Reducing the airwaves possession to 10 years will lead to operators have to pay a significantly lower amount upfront."

Chandrasekhar also pointed out that selling airwaves for a 10-year period had both advantages and disadvantages for the government and companies. "The upside is that telcos have to pay less, but at the same time, a 10-year tenure adds to the uncertainties.

"If technological advancements allow airwaves to be used for different types of services, the value of spectrum will go up and the government can resell this same resource after 10 years," he said.