London, April 28

John Giusti, chief regulatory officer of GSMA, commented on the importance of adjusting the reserve prices for India’s forthcoming 700MHz spectrum auction to meet the Indian government’s objectives of increasing mobile broadband penetration.

“The GSMA is concerned that, if the Telecom Commission maintains the current reserve prices for 700MHz spectrum in India, there is the risk of a failed auction or, at a minimum, serious limitations on investment capability in next generation networks, denying the enabling social and economic power of this important spectrum resource to the citizens of India.”

The reserve prices for this much-needed spectrum are unrealistic in relation to the economics of the mobile industry. In fact, the total recommended reserve prices of INR 5.36 trillion (over $80 billion) for the spectrum bands in the auction are almost double the cost of all spectrum investment to date in India. This equates to more than 20 times the annual free cash flow of the entire mobile industry in India, he says.

“The government’s decision to reduce Spectrum Usage Charges from five to three per cent is a step in the right direction, but it will not do enough to offset such high spectrum prices. In competitive markets like India, setting reasonable reserve prices would allow auction mechanisms to work in determining the market price in assigning the spectrum.”

In the event that the spectrum reserve prices are not reduced, the Indian government ‘runs the risk that spectrum will go unsold, as happened in Australia and recently in Senegal’, he warned.