Next 4G spectrum auction in March3 min read . Updated: 17 Dec 2020, 05:50 AM IST
- Govt to auction ₹3.92 tn worth of airwaves across 7 spectrum bands
India plans to auction ₹3.92 trillion worth of airwaves suitable for fourth-generation (4G) mobile networks in March after a gap of more than four years, as the government seeks to raise resources to fund infrastructure spending and carry out a nationwide vaccination programme.
The Union cabinet on Wednesday approved the auction of 2,251 megahertz (MHz) of spectrum, telecom minister Ravi Shankar Prasad said. The government will auction spectrum in the 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz and 2500MHz bands, some of which are touted as the most efficient for 4G services. Spectrum in the 3300-3600MHz bands, recommended by the telecom regulator for fifth-generation (5G) networks, have not been included in the auction.
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The auction is crucial for Reliance Jio Infocomm Ltd as its rights to use a major chunk of its spectrum in the 800MHz band will expire next year. Analysts said Reliance Jio may also bid for spectrum in the 700MHz band, which is most suited for 5G among the bands on sale. Mukesh Ambani, chairman of Reliance Industries Ltd, has said Jio plans to roll out 5G services in the second half of 2021.
“Jio may look at renewal and add new spectrum in circles to accommodate 4G growth, while Airtel and Vodafone Idea will not be that aggressive. Airtel may pick up spectrum in metro circles to improve the quality of its services, while Vi is expected to only renew spectrum due to its financial situation," said telecom expert Rajiv Sharma.
The department of telecom (DoT) will conduct the auction at the reserve price recommended by the Telecom Regulatory Authority of India (Trai), said a government official, adding that the reserve price was calculated by removing the value of the 3300-3600MHz bands.
However, analysts fear the next round of spectrum auction may be a repeat of the 2016 fiasco when large chunks of airwaves remained unsold due to high minimum prices. Four years ago, the government had raised just ₹65,789 crore through spectrum auction, a fraction of the ₹5.63 trillion worth of airwaves put on sale. Spectrum in the 700MHz and 900MHz bands were completely unsold in 2016.
Pricing of spectrum has been an issue, with top executives at Bharti Airtel Ltd and Vodafone Idea Ltd repeatedly demanding that the government lower spectrum prices.
“700MHz spectrum is likely to be skipped again unless the reserve price is lowered. Supply of spectrum is higher compared to demand, and we expect most spectrum to get sold at or close to the reserve price," a telecom analyst said, requesting anonymity.
Jio has been using bankrupt Reliance Communications Ltd’s spectrum in the 800MHz band under a trading and sharing agreement to expand its 4G coverage across the 21 circles. Jio’s right to use the spectrum in 18 circles of these will end by August.
Airtel and Vodafone Idea will also have to renew the airwaves by that time but will need to repurchase spectrum mostly in the less-expensive 1800MHz band.
Bidders will have to comply with auction conditions such as block size, spectrum cap, which specifies the maximum limit for holding airwaves by each bidder. The spectrum sold will be valid for 20 years.
Buyers can either pay the entire bid amount upfront or initially make a 25% payment for the spectrum purchased in the 700MHz, 800MHz and 900MHz bands, and 50% for airwaves bought in the 1800MHz, 2100MHz, 2300MHz and 2500MHz bands. The remaining amount can be paid in a maximum of 16 annual instalments after a moratorium of two years. “In addition to the bid amount, successful bidders will also have to pay 3% of the adjusted gross revenue, excluding wireline services as spectrum usage charges for the spectrum won through this auction," the statement said.