Spectrum auction ends, govt makes Rs65,789 crore, misses target

Proceeds from spectrum auction a fraction of the Rs5.63 trillion of airwaves on offer; no bids were received for 700 MHz, 900 Mhz bands

Upasana Jain
Updated7 Oct 2016
Airwaves in the 2,300 megahertz band sold out as telecom operators spent to increase their 4G mobile broadband services. Photo: Mint
Airwaves in the 2,300 megahertz band sold out as telecom operators spent to increase their 4G mobile broadband services. Photo: Mint

New Delhi: India’s largest spectrum sale ended on Thursday, five days after it started, with the government raising 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 in the auction of 2,354.55MHz of radio waves that some analysts said were too expensive. The government sold 41%, around 965MHz.

Telecom minister Manoj Sinha said the government will receive at least Rs32,000 crore upfront (excluding service tax) in line with new norms that require telcos to pay 25% of the price upfront for spectrum in the 700, 800 and 900MHz bands and 50% for higher frequencies. Payments will have to be made in 10 days after the sales are approved.

“Upfront payments should be received before Diwali (30 October),” a government official said on condition of anonymity.

The finance ministry, in the budget for fiscal 2017, pegged the revenue target from the telecom industry at Rs98,995 crore. This included upfront receipts of Rs64,000 crore from the auction.

“I think it is a successful auction and a big achievement. The total upfront (payment of) Rs32,000 crore is the highest upfront payment received in five years,” Sinha said. “Wherever companies wanted to improve data services, they have bid accordingly. For some spectrum, ecosystem was not ready and so has not been sold.”

In 2010, a similar auction went on for more than a month and a 2015 edition lasted 19 days and 115 rounds. As per the base price set by the Telecom Regulatory Authority of India, the premium 700MHz band alone had the potential to fetch bids worth over Rs4 trillion, but the band remained unsold, along with 900MHz band.

Telecom operators are filling up gaps in their spectrum holdings to provide better data services considering the intense competition in the industry, especially since Reliance Jio Infocomm Ltd launched its 4G services last month.

India’s largest telco, Bharti Airtel Ltd, in a statement said that it has acquired 173.8MHz of spectrum across the 1,800/2,100/2,300MHz bands for a total consideration of Rs14,244 crore.

“Airtel has further strengthened its pan-India spectrum portfolio and secured its spectrum requirements for the next 20 years. The company now has 4G and 3G spectrum in all circles, giving it the widest mobile broadband footprint across the country,” it said.

Vodafone India Ltd spent more than Rs20,000 crore in the spectrum auction, a person familiar with the development said.

Reliance Jio in a statement said it acquired the rights to use 269.2MHz of spectrum across all 22 service areas for Rs13,672 crore.

“We have expanded our spectrum footprint thereby significantly enhancing capacity of our all-IP data strong network and ensuring world class services for all Indians. Jio is committed to taking India to global digital leadership by bringing the power of data to all Indians,” said Reliance Industries chairman Mukesh Ambani.

Airtel also said that the pricing of the 700MHz band spectrum needs to be addressed on a priority basis for the country to reap the digital dividend arising of this high-quality spectrum band. “It made no economic case for them (telcos) based on the high reserve prices,” the company said.

Lower frequencies are better at passing through walls and travelling longer distances than higher frequencies, allowing carriers to set up fewer cell towers and save on costs. They’re also usually more expensive to get.

“In fact, the financial strain on the industry and a high reserve price are the major reasons why the 700MHz band did not attract bidders,” said Rajan S. Mathews, director general of the Cellular Operators Association of India, an industry lobby. “On many an occasion, COAI has raised the issue of the high reserve price on the band, and how this could affect investor interest during the auction.”

Idea Cellular Ltd said it had secured a pan-India wireless broadband footprint in the auction.

“Idea has filled all of its spectrum coverage requirements, while procuring a substantial part of its broadband capacity needs for the next decade. The company will now focus on expanding its wireless broadband presence primarily on 4G LTE technology to over a billion Indians while offering world class high speed digital customer experience like never before,” said Kumar Mangalam Birla, chairman of Idea Cellular. Idea acquired 349.20MHz of spectrum at an aggregate bid value of Rs12,798 crore.

The government offered spectrum in seven bands: 700MHz, 900MHz, 1,800MHz, 2,100MHz , 2,300MHz and 2,500MHz.

The shortfall may force the government to conduct another sale of spectrum in a couple of years when it is likely to lower the reserve price of the spectrum, especially in the 700MHz and 900MHz bands, Bloomberg reported, citing unnamed government officials.

Mint on 16 September first reported that the government may have to look at another auction in case the one that started on 1 October fails to draw enough bids.

The spectrum sale also missed estimates of brokerages such as IDFC Securities Ltd, which estimated that it would raise between Rs75,000 crore and Rs80,000 crore.

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