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Indian telcos welcome release of spectrum for commercial usage

The spectrum swapping deal between two ministries is expected to fetch another $4.5 billion to the exchequer.

In a big relief to the Indian telecom service providers, the Ministry of Defence has agreed to release 15MHz spectrum in the 1800MHz band to the Department of Telecommunications (DoT) as part of a spectrum harmonisation process. In return, the latter has agreed to give 15MHz in the 2100MHz band to the defence ministry.

The two ministries reached an understanding to this effect after Indian Minister for Telecommunications Ravi Shankar Prasad met his Cabinet colleague and Defence Minister Manohar Parrikar to discuss the modalities early this week. The deal concludes on the eve of a high-level meeting of the DoT, to be held on June 7, to finalise the dates and other formalities for auctioning the next round of spectrum.

The process was set in motion seven years ago but things started moving after Narendra Modi became prime minister in May 2014.

The spectrum swapping deal will enable the government to auction 15MHz of spectrum in the 2100MHz band in each of the 22 telecom circles in the country in the next round of spectrum auctions, likely to be held next month. The value of the spectrum to be surrendered by the Ministry of Defence is said to be around 30,000 crore rupees ($4.5 billion).

With this, the total value of the spectrum that would be auctioned in the coming weeks is estimated to be around 5.7 lakh crore rupees (approximately $90 billion), making it the biggest spectrum auction ever in the country.

"We are pleased with the Defence Ministry's decision to release the spectrum in 1800MHz for commercial purpose as it is increasingly used in rolling out Long-Term Evolution (LTE) services," Rajan S Mathews, secretary general of the Cellular Operators Association of India (COAI), told ZDNet.

The service providers are jubilant because the spectrum in the 1800MHz band is not only reasonably priced compared with the one in the 700MHz band, but also very helpful to them in providing 4G services in the country in an economic manner.

"Due to high reserve price, the demand for spectrum in the 700MHz band would be less and the spectrum in 1800MHz will be next best for the telecom companies," Mathews added.

According to a report in Business Standard, 108 operators have commercially launched 4G services on the 1800MHz band in 58 countries. The 1800MHz band covers 44 percent of the total LTE or 4G networks globally. 4G services on 1800MHz needs 30 percent fewer towers than on 2300 MHz and pan-India network would cost between 10,000 rupees and 15,000 crore rupees, the report said.

Early this year, the Telecom Regulatory Authority of India (TRAI) fixed the reserve price at 2,873 crore rupees ($435 million) per MHz spectrum in the 1800MHz band, whereas it was pegged at 11,485 rupees ($1.7 billion) per MHz spectrum in the 700MHz band.

The government has also relaxed the terms of payment for successful bidders in the next round of spectrum auction. TRAI too proposed that telcos could first pay 10 percent of the bid amount; the balance 90 percent could be paid over 18 years with 18 equal annual installments, along with interest.

With these concessions, the government now expects that the telecom companies, which were hesitant to participate in the bidding for spectrum, will go all out to buy spectrum in the next round of auction.