The much-hyped India’s largest ever spectrum auction concluded on Thursday, with the government being assured Rs.65,789 crore in revenue.
Of the 2,355 megahertz (MHz) of spectrum across seven bands put up for bids, only 965MHz, or around 40%, got sold.
The auctions saw 31 rounds of bids on the fifth and the final day of auctions, which started on 1 October. Bharti Airtel Ltd, Vodafone India, Idea Cellular Ltd, Reliance Communications Ltd, Aircel Ltd, Reliance Jio Infocomm Ltd, and Tata Teleservices Ltd participated in the current auctions.
“Spectrum scarcity will no longer be a constraint for offering quality of services,†said J.S. Deepak, telecom secretary.
The 700MHz band, which is the most efficient band for 4G services, especially indoors, and the 900MHz band did not find any takers.
The pricing of the 700MHz was an issue, conceded a government official who did not want to be named.
“The tepid response to spectrum in the 700MHz band is owed to a high reserve price. The lack of enthusiasm was majorly due to its unrealistic pricing, high debt and single-digit growth that the industry is currently reeling under,†said Rajan Mathews, director general, Cellular Operators Association of India (COAI), a lobby group.
He added COAI is hopeful the government will take cognisance of the role a high reserve price had on bidding, as far as the 700MHz is concerned, and will recalibrate the price so that spectrum in the band could be put up for auction, maybe two years from now.
The government expected to raise at least Rs.64,000 crore from the auction and Rs.98,995 crore from various levies and services in the telecom sector this financial year, as per Union Budget.
However, the target of Rs.64,000 crore for the current financial year is missed as upfront payment of only Rs.32,895 crore will accrue in the current year, which is the highest in the last five years from spectrum auctions. The rest will be deferred over a period of 10 years after completion of the two-year moratorium during which no payment will come in.
Analysts had predicted that given the high price of spectrum bands and weak balance sheets of telecom operators, the current auction may not witness aggressive bidding.
According to experts, the auction has not quite worked the way the government envisaged.
“There is no doubt that the government will have to consider another auction to dispose the unsold spectrum. The government must set a reasonable reserve price which should be only high enough to deter non-serious players. Setting too high a reserve price effectively pre-empts the auction instead of allowing the market to discover the price,†said Mahesh Uppal, founder, Com First, consultancy firm.
Auction by all counts seem to have failed as far as at least the largest chunk of spectrum is concerned, Uppal added.
While PhillipCapital (India) Pvt. Ltd expected telecom operators to spend around Rs.29,000 crore, Kotak Institutional Equities expected total bids to be in the range of Rs.46,500-93,000 crore, with an upfront payout of Rs.21,600-42,400 crore.
A pan-India reserve price of Rs.2,873 crore was fixed for 1,800MHz, Rs.3,341 crore for 900MHz, Rs.5,819 crore for 800MHz, Rs.3,746 crore for 2,100MHz, Rs.11,485 crore for 700MHz and Rs.817 crore each for 2,300MHz and 2,500MHz bands.
“In 800MHz frequency, 15MHz got sold out of total 73.75MHz on block. In 1,800MHz frequency, 175MHz out of 221MHz was sold. In the 2,100MHz slab, 85MHz out of 365MHz was sold. While in 2,300MHz, entire 320 MHz got sold; in the 2,500MHz slab, 370MHz out of 600MHz was sold,†according to another senior official from the ministry who did not want to be named.
Many believed that Reliance Jio’s entry didn’t bear a good omen for the spectrum auction. Jio bought 269.2MHz of spectrum across 800MHz, 1,800MHz and 2,300MHZ bands for Rs.13,672 crore.
Bharti Airtel Ltd spent Rs.14,222 crore to acquire 175MHz of spectrum in 1,800MHz, 2,100MHz and 2,300MHz bands.
Idea Cellular Ltd in a statement said it acquired 349.20MHz of spectrum for Rs.12,798 crore in this auction to boost both coverage and capacity. It acquired spectrum in 1,800MHz, 2,100MHz, 2300MHz and 2,500MHz bands.
“Operators participated to fill in the gaps in their data spectrum portfolio. For some spectrum, telcos did not have ecosystem ready and that spectrum remains with the government,†communications minister Manoj Sinha said.
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