No money with telecom firms to bid for more spectrum: COAI

COAI director general Rajan Mathews says telecom firms can’t afford to bid again in a spectrum auction for at least the next two-three years

Cellular Operators Association of India director general Rajan Mathews. Photo: Hindustan Times
Cellular Operators Association of India director general Rajan Mathews. Photo: Hindustan Times

New Delhi: Telecom companies can’t afford to bid for more spectrum even if the government were to hold another auction, after managing to sell just 41% of the radio waves it offered earlier this month, said a top executive at the industry lobby group.

The government raised Rs65,789.12 crore in revenue, of which less than half will accrue to the exchequer in the current fiscal year. The money is just a fraction of the Rs5.63 trillion (at base price) of spectrum put up for sale.

Telecom companies can’t afford to bid for any more spectrum for at least the next 2-3 years, said Rajan Mathews, director general of the Cellular Operators Association of India (COAI).

“Even if the exchequer does this (re-auctions spectrum) to earn revenues, there is no money left in the pockets of telcos to participate,” Mathews said in an interview.

“The operators would not want the next round of auctions earlier than 2-3 years because they are all stacked up and, in effect, it will take at least six months to roll out networks on spectrum bought recently,” Mathews added.

The efficient, but expensive 700MHz spectrum went unsold in the auction.

That band alone had the potential to fetch bids worth over Rs4 trillion.

The finance ministry has set a target of raising Rs98,995 crore from communication services in this financial year, including proceeds of the spectrum auction and other fees.

It only managed to raise Rs32,000 crore in upfront payments at the auction.

Telcos including Bharti Airtel Ltd, Vodafone India Ltd, Idea Cellular Ltd and Reliance Jio Infocomm Ltd used the spectrum sale to plug gaps in their networks as competition intensifies with the entry of Jio last month.

With almost 60% of spectrum going unsold, telecom minister Manoj Sinha said this month that the government may look to revise prices and conduct another auction.

“All of the operators have got what they wanted and so, our opinion is wait for two years or so and don’t just put up spectrum for auction for the sake of it,” Mathews said.

According to Hemant Joshi, partner at Deloitte Haskins and Sells, the last auction results have indicated the mood of the telecom market. “The results have established the ability and willingness to pay for spectrum which is futuristic and that the telcos are under huge financial stress. The sector has debt burden, competitive pricing and falling ARPUs (average revenue per user),” said Joshi.

“This sector has already contributed a lot in the past four auctions, but this cannot be a continued thing. The exchequer will earn revenues from telecom companies by way of licence fees and other levies,” Joshi said.

The telecom industry is weighed down by Rs3.8 trillion of debt.

Mathews of COAI said demand in the next round of auction will be driven by data consumption patterns and how 4G services pick up.

After the auction, Bharti Airtel remains the leader with a spectrum market share of 22%, followed by Reliance Jio with 19%, up from 18%. Vodafone and Idea have improved their spectrum market share to 15% from 13% and 11% from 10%, respectively.