Largest spectrum auction to kick off on 1 October amid telecom battle

Reliance Jio, Reliance Communication, Aircel are in one corner, Airtel, Idea and Vodafone in the other, even as debate on reserve prices for spectrum auction continues


The main headline of this spectrum auction would be that this would once and for all end spectrum scarcity. Photo: Pradeep Gaur/Mint
The main headline of this spectrum auction would be that this would once and for all end spectrum scarcity. Photo: Pradeep Gaur/Mint

New Delhi: India’s largest spectrum auction starts on Saturday against a backdrop of battling telecom firms. That the sale of spectrum could lead to more bandwidth for telecom firms to address call drops is almost an afterthought.

On offer is 2,354.55 megahertz (MHz) of spectrum worth Rs5.63 trillion at the minimum or reserve price.

Reserve prices that both telecom firms and analysts said were set too high by the government had sparked concern that response to the auction might be muted.

“Reliance Jio is in the limelight because of its three-month free services window, ARPU (average revenue per user) will be affected, tariffs will go down even as volumes go up. Therefore, I don’t see unreasonable bidding,” said Dharmesh Kant, head of retail research at Motilal Oswal Financial Services Ltd.

The battle lines are drawn between two camps. In one corner is Mukesh Ambani’s Reliance Jio Infocomm Ltd, Reliance Communications Ltd (R-Com, controlled by Anil Ambani) and Aircel Ltd (which is to merge with R-Com).

In the opposing corner are the country’s top three telcos—Bharti Airtel Ltd, Vodafone India, and Idea Cellular Ltd. With future fortunes at stake, companies are pulling out all the stops. Just last week, Vodafone said it would invest $7 billion in India, some of which will surely go into the auction.

“When there is a new player in a competitive sector, there is bound to be an upheaval,” J.S. Deepak, secretary, department of telecom, said in a 19 September interview.

“The main headline of this auction would be that this would once and for all end spectrum scarcity.”

The big question, though, is: will the government meet its revenue target?

In the Union budget, finance minister Arun Jaitley estimated revenue of Rs98,995 crore from communication services in 2016-17. That includes proceeds from the auction and fees levied by the telecom department.

According to Sanjay Kapoor, former chief executive of Airtel, Jio’s entry has changed everything.

Telcos will have to buy more spectrum and “operationalize it” even as their profitability is “being challenged”, he said.

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