Why another round of spectrum auction does not seem to be a good idea

In the last round of spectrum auction held about five months ago, the Centre raised Rs65,789.12 crore in revenue and missed its own targets by a big margin


There would be a need for spectrum in 2300 Mhz and 2500 Mhz in order to have a pan-India 3G footprint. Photo: Mint
There would be a need for spectrum in 2300 Mhz and 2500 Mhz in order to have a pan-India 3G footprint. Photo: Mint

New Delhi: The government on Tuesday said that it plans to make spectrum auctions an annual affair and will soon seek recommendations of the regulator on the issue.

The move comes just about five months after the government conducted its last round of spectrum auction with the Centre raising Rs65,789.12 crore in revenue, missing its own targets by a big margin.

The sum is just a fraction of the Rs5.63 trillion (at base price) of spectrum put up for sale in the auction of 2,354.55MHz of radio waves, which some analysts said were too expensive.

The government sold 41% of spectrum in the auction at around 965MHz. The finance ministry, in the budget for fiscal 2017, had pegged the revenue target from the telecom industry at Rs98,995 crore. This included upfront receipts of Rs64,000 crore from the auction.

The fact that the previous auctions were wrapped up in five days, as compared with the 2010 edition when it went on for more than a month and the 2015 edition when it lasted 19 days, indicates that amid rising competition and increasing cost pressures telcos have little risk appetite left to invest in purchase of spectrum, especially when most of their needs are met.

Even in the 2016 auctions, companies were careful and placed bids largely to plug in gaps in their network coverage.

Also, since consolidation in the industry has picked up pace and there are suggestions from industry experts, that only three or may be four companies will survive the rapidly changing equations of the industry, it is clear that those who will survive (Airtel-Uninor, Vodafone-Idea combined, Reliance Jio and RCOM-SSTL-Aircel) will operate with adequate spectrum holdings in their operational bands.

The upcoming groups have pan-India coverage in liberalized spectrum in their respective 4G deployment bands.

To be sure, there would be a need for spectrum in 2300 Mhz and 2500 Mhz in order to have a pan-India 3G footprint. But, that could be done through exercises such as trading and sharing of spectrum.

Renewal of 800/900/1800 MHz spectrum will be done on expiry, which mostly falls in 2021 and 2026 for most operators.

The most expensive 700 Mhz band went unsold largely due to its high reserve price and in all likelihood that will be put on table again as the government under the guidance of Telecom Regulatory Authority of India (Trai) is preparing a framework for internet of things and the roll-out of 5G services in India and the 700 Mhz is ideal for them.

But, as per the base price set by Trai, the premium 700MHz band alone had the potential to fetch bids worth over Rs4 trillion, but telcos gave it a miss and there seems to be no reason why telcos will place bid for 700 Mhz this around, especially when they are experiencing significant erosions in profits and revenues and their combined net debt has ballooned to Rs4.42 trillion.

Under such circumstances and amid paucity of liquidity and cash-flows, telcos are unlikely to spend excessively through any other route.

More From Livemint