Spectrum auction: Telcos wary, bidding remains muted on Day 3
- Farm loan waiver: Maharashtra detects 1.5 million suspicious bank accounts
- BJP has successfully covered 75% of polling booths in 3 years: Amit Shah
- OPG Securities approaches SAT against NSE’s suspension notice
- RBI revises investment, trading rules for banks
- India needs robust cold chain supply system to increase farmers’ income, say experts
New Delhi: Indian telecom operators, grappling with weak financials and a looming price war, continued to bid cautiously on the third day of the country’s biggest spectrum auction.
The government raised Rs4,177 crore on the third day, taking the total bids to Rs60,969 crore, a fraction of the Rs5.6 trillion worth of spectrum on offer. At this rate, the current auction is likely to raise even less than the 2015 auction, when the government sold Rs1.1 trillion of airwaves.
The bidding intensity in the ongoing auction reflects the reluctance of operators such as Bharti Airtel Ltd, Vodafone India Ltd, Idea Cellular Ltd and Reliance Jio Infocomm Ltd to buy airwaves that they consider are priced steeply. Spectrum in the prized 700MHz band remained unsold on Tuesday and is unlikely to find any takers.
“Over a third of the spectrum remains unsold. This clearly underscores operators’ reluctance to trade on exorbitant reserve prices,” said Prashant Singhal, global telecom leader at consulting firm EY. “Going by the numbers, the 2016 spectrum auction may last only a day or two.”
The government has so far sold 900MHz, or a little more than one-third of the 2354.55MHz on offer, a person familiar with the development said, requesting anonymity.
Unless things pick up, the government may find it difficult to generate the budgeted Rs98,995 crore of revenue from communication services for the year to March. The amount includes proceeds from spectrum auction and other fees levied by the telecom department. However, only a fraction of the amount raised via the auctions will flow into the government’s coffers this year because companies are allowed to pay in instalments.
Most brokerages say the auction will end this week.
“We expect the slowdown in bidding activity to continue and believe that the auctions can potentially close some time this week,” Goldman Sachs said in a report on 3 October.
On the same day, Deutsche Bank also said the muted response was on expected lines. “At the end of 17th round, action was seen in 1800MHz in Mumbai and a few other circles. The 2300MHz too was hot in Mumbai and Gujarat but there was tepid response to 2100MHz band,” another person familiar with the matter said, adding that round 18 of the auctions will start on Wednesday at 10am.
The flagging of intensity in the auction on Monday, the second day of auction, was expected after telcos aggressively plugged gaps in their network through active participation on Saturday, in all the bands except for the 700MHz and 900MHz ones on the first day.
The current auction indicates that the Telecom Regulatory Authority of India (Trai) and the government made a serious miscalculation about the reserve price of the 700MHz spectrum, said Mahesh Uppal, a telecom consultant and director at ComFirst (India) Pvt. Ltd.
“The admittedly better propagation qualities of 700MHz are simply not sufficient to drive demand,” Uppal said.
The base price for the 700MHz is fixed at Rs11,485 crore for 1MHz, making the bidder liable to pay Rs57,425 crore for 5MHz on a pan-India basis.
The 700MHz band is attractive but wrongly priced, said Rajan Mathews, director general of industry lobby Cellular Operators Association of India.
“The first day witnessed maximum bidding because as per NIA (notice inviting applications), 80% of the EMD (earnest money deposit) has to be committed, which explains the jump start. However, nobody is willing to bid irrationally this time,” Mathews added.