Yesterday, TRAI came out with the recommendation of reserve prices for various spectrum band (700, 800, 900, 2100, 2300 & 2500 MHz). Of this, the reserve price of 700 MHz is of deep interest – as it is a new band and there are no market prices to refer to. TRAI’s recommended reserve price for 700 MHz is 1.93 times the reserve price of 800 MHz band – the band with almost similar propagation characteristics. Hence, out of curiosity, I went through the recommendation to figure out the rationale. The clause no 3.75 (page 97) of the recommendation contains the rationale. This is reproduced as under.
“… Technical efficiency based valuation can be one of possible valuation but not the only one. Market revealed value and trends is a better indicator of value placed to the spectrum. As was recommended by the Authority in April 2012, the auction of 700 MHz band, the reserve price should be around four times that of 1800 MHz band and therefore, the same can be used for valuation of 700 MHz band as market revealed prices for 1800 MHz band are available. In absence of any other better approach, the same is being followed in the valuation of 700 MHz band. The Authority recommends that reserve price of 700 MHz band should be equal to four times of reserve price of 1800 MHz. Accordingly, the recommended reserve price of 700 MHz spectrum band for each LSA..“
