Spectrum lease tenure likely to be reduced from 20 to 10 years

The department of telecommunications (DoT) is considering reducing the tenure of spectrum leased to telecom operators through auctions to 10 years from the current 20 years.

This is being evaluated as the life cycle of technology is getting shorter and the value of spectrum getting eroded over a longer period, resulting in operators not being able to realise its full value, officials said. If the proposal is finalised, it will be implemented in future auctions.

Telecom industry sources, however, said that in case the tenure is cut, the government needs to bring down the reserve price as well.

The first auctions in the country happened in 2010 for 3G spectrum through which the government mopped up over Rs 1 lakh crore. Today, 3G technology is dead with operators shutting down these services and moving on to 4G and 5G, making 3G spectrum valueless.

Usually, in such cases, there is a process to re-farm the spectrum. This means that if the same spectrum can be used for, say 4G services, operators will have to pay the auction-determined prices for it after a 4G auction to use it for these services. “So, the economic value of spectrum will be better realised if it’s sold for lesser number of years,” an official said.

The officials also pointed out that on a yearly basis, telecom operators are spending anywhere around 15-40% of their adjusted gross revenue (AGR) on spectrum-related payments. This includes yearly investments on spectrum auctions and the payments for the spectrum acquired in the previous auctions.

Interestingly, around two years ago, the government had proposed increasing the lease tenure of spectrum to 30 years and the Telecom Regulatory Authority of India (Trai) had even made a recommendation to its effect.

Officials said that in future, the DoT will put up any particular band of spectrum for auctions only after conducting a study on its longevity, along with the demand and supply situation.

The operators have anyway now been given the option to surrender the spectrum bought in auctions after 10 years.

Operators recently have made a submission to Trai for a 5-6 year interest-free payment gap or moratorium on the spectrum bought in auctions in 2025 and beyond. This means that if the spectrum is currently leased to operators for a 20-year period, they want to pay only for 14-15 years in equal, annual instalments. Financial Express