Govt may earn Rs50,000 crore from upcoming spectrum auction: Credit Suisse

New Delhi: The government may earn as much as 50,000 crore from the upcoming spectrum auctions, according to a calculation by Credit Suisse Securities Research & Analytics.

For the calculation, Credit Suisse used the government’s non-tax revenue estimate of 98,994.93 crore expected from spectrum auction, license fees and one-time spectrum charges in 2016-17 provided in the receipts budget.

The number is 72.5% higher than the 57,383.89 crore revised estimate provided for the current fiscal year. The government had earlier estimated revenue of 42,865.62 crore in 2015-16.

“Receipts from telecom sector for fiscal year 2017 are expected to be approximately 990 billion (99,000 crore). In our estimate, this would include recurring license and spectrum fees revenues of 220 billion (22,000 crore); deferred payments from past auctions to the tune of 65 billion (6,500 crore); one-time spectrum fees of 200 billion (20,000 crore) and balance approximately 500 billion (50,000 crore) likely from upcoming spectrum auctions,” Sunil Tirumalai and Chunky Shah, telecoms analysts with Credit Suisse, wrote in the report.

“If the above math is correct, then the government is likely budgeting a 1,625 billion (1.625 trillion, or $25 billion) spectrum sale from the auctions, 25-30% of which would get paid immediately (and form part of revenue receipts for the year). This implies approximately 30% of value of spectrum on offer gets sold at Trai reserve prices,” the report added.

Trai is short for the Telecom Regulatory Authority of India.

Going by this calculation, the Credit Suisse analysts expect that the 700MHz spectrum, that is expected to go on the auction block, will get partially sold.

“If the government does achieve these numbers, it would be a significant negative for the sector,” the report said.

The budget estimates also include money from earlier auctions, as winning bidders are allowed to pay in equated annual instalments, after paying around 25% of the bid amount as an upfront fee.

In January, the telecom regulator submitted its recommendations for reserve price for 2,142 MHz of spectrum to be auctioned in the 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz 2300MHz and 2500MHz bands. Going by TRAI’s suggested prices, the total value of the spectrum to be auctioned is estimated at around 5.5 trillion, five times the amount raised in any of the previous spectrum auctions held since 2010.