New Delhi: The auction price of high-speed third-generation (3G) airwaves for mobile telephony on Monday crossed the Rs1,651 crore mark in Mumbai and New Delhi—the price at which new operators were given licences nationally in January 2008, prompting estimates by some experts of a steep underpricing and loss to the government in the allocation of 2G spectrum some years ago.
In 2001, the department of telecommunications (DoT) auctioned its fourth telecom licence, which discovered a price of Rs1,651 crore for 4.4MHz of spectrum nationally, or around Rs375 crore per MHz.
This price was then used to allocate licences and start-up spectrum of 4.4MHz to new entrants, including Unitech Wireless, Loop Telecom, Etisalat DB Telecom India Pvt. Ltd, Sistema Shyam TeleServices Limited and S Tel Pvt. Ltd in January 2008.
Many of these firms then sold stake to foreign companies for huge premiums—the DB Group-promoted Swan Telecom (now Etisalat DB) sold a 45% stake to UAE-based Etisalat for $900 million (around Rs4,000 crore); Sanjay Chandra-promoted Unitech Wireless sold 67% in its telecom venture to Norway-based Telenor ASA for $1.1 billion.
Graphic: Ahmed Raza Khan/Mint
Their only assets at the time were the allocated spectrum.
On Monday, Day 20 of the ongoing 3G spectrum auction that began on 9 April, the price of a slot of airwave nationally was Rs10,348 crore, or Rs2,069.6 crore per MHz—5.7 times the price of the 2G spectrum allocated in January 2008.
“Clearly, the 2G spectrum given was mis-priced. The operators are willing to give so much more for spectrum in the most competitive market in the world with 14 operators,” a Mumbai-based analyst said on condition of anonymity as his organization has not authorized him to speak with the media. “But you (also) have to see that first the operators were starved of spectrum and then 3G is being auctioned in a scenario where the operators are under a lot of pressure and have to be willing to spend as much as possible to get 3G.”
The magnitude of the earnings the government is expected to get from the auction of 3G spectrum will go a long way in sealing the policy debate on whether spectrum should be allocated or auctioned.
Most of the spectrum being used by telecom operators in India had been allocated to them, for which the firms pay 2-6% of their adjusted gross revenue (AGR) towards spectrum usage charges.
Third-generation mobile telephony enables more efficient use of spectrum at higher frequencies, enabling faster data speeds on handsets and greater capacity for voice. This allows use of applications such as video streaming and high-definition games on cellphones.
Some analysts and officials say the ongoing auction will end with this week with a pan-India slot of 3G spectrum likely going at just short of Rs11,000 crore. “The auction should go on for another five days,” said a senior DoT official, also on condition of anonymity.
Telecom minister A. Raja has come under much criticism for allocating spectrum in 2008 at a price discovered in 2001, while the Telecom Regulatory Authority of India (Trai) had suggested auctioning the airwaves.
Raja faces accusation of causing a loss of Rs1 trillion to the government by following an allocation policy.
The Comptroller and Auditor General, the Central Bureau of Investigation and the Central Vigilance Commission are investigating the awarding of licences to new entrants then.
A committee on 2G spectrum, headed by DoT additional secretary Subodh Kumar, has recommended in its report submitted to the department last year, that all spectrum, apart from start-up airwaves, be auctioned. The report is under discussion at Trai.
Existing operators are allocated spectrum based on the number of subscribers on their network—known as subscriber-linked criteria.
But the government put on hold any allocation of new spectrum in May last year on request from the finance ministry. This has led to a significant crunch of resources for telecom firms and increased congestion in the networks.
Raja said last week he expected earnings from the 3G spectrum auction to be in the Rs50,000-55,000 crore range.