2 min read.Updated: 07 Oct 2020, 10:56 PM ISTIshita Guha
The next round of spectrum auctions could turn out to be a repeat of the 2016 fiasco when vast chunks of airwaves remained unsold, telecom analysts said, given similar high reserve prices and disinterest among two of the three private telcos
NEW DELHI :
The next round of spectrum auctions could turn out to be a repeat of the 2016 fiasco when vast chunks of airwaves remained unsold, telecom analysts said, given similar high reserve prices and disinterest among two of the three private telcos.
The department of telecommunications (DoT) plans to auction 8,300 megahertz (MHz) of spectrum at a base price of ₹5.23 trillion. It will sell spectrum in the 700MHz, 800MHz, 900MHz, 1,800MHz, 2,100MHz, 2,300MHz, 2,500MHz bands, while the airwaves in the 3,300-3,400MHz and 3,400-3,600MHz bands, meant for 5G services, may be sold later.
“(Reserve) price levels are unaffordable… We may see some picking and choosing in the 800MHz, 900MHz, 1,800MHz, 2,300MHz and 2,500MHz bands, but it will not be aggressive. In the auctions, we expect Jio’s participation to be the highest, followed by Airtel and not much from Vodafone Idea," an analyst said on condition of anonymity.
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 up for sale.
According to an April 2019 report by the Indian Council for Research on International Economic Relations, the result of the 2016 spectrum auction was uneven. “The steep reserve prices in the 700MHz band made little economic sense for operators. Consequently, spectrum in the 700MHz and 900MHz bands remained completely unsold."
Airtel CEO Gopal Vittal, in an analysts’ call after the June quarter results, said the fundamental issue with 5G is the cost of spectrum, which “is way over the top for any kind of business model to work". “We have always maintained that the indicative reserve price on the spectrum of 5G, the 3.5GHz band, is very very expensive and we will not be able to afford it at those levels," he said.
While the next auction will be critical for Reliance Jio Infocomm Ltd as a major chunk of its airwaves will expire next year, rival Bharti Airtel Ltd is in no hurry to buy and Vodafone Idea may hardly participate due to stressed financials, analysts said.
In a letter written to the DoT on 28 September, Reliance Jio had urged the Centre to conduct spectrum auction at the earliest, hinting that Airtel and Vodafone Idea are not interested as they sit on large amounts of airwaves amassed through mergers and acquisitions over the years. Jio told DoT that additional spectrum was required to improve the quality of 4G data services.
It also said the delay in spectrum auction will hurt investor confidence and lead to huge losses in government revenues.
Spectrum in the 800MHz band is seen as the most efficient and is used for 4G services. Reliance Jio provides only 4G services.
Jio has been using bankrupt Reliance Communications Ltd’s spectrum in the 800 MHz band under a trading and sharing agreement to expand its 4G coverage across 21 circles in the country. Of the 21, the licence for 18 circles will expire in July-August 2021.
Airtel and Vodafone Idea will also have their airwaves expiring around the same time, and will need to repurchase spectrum, but mostly in the less-expensive 1800 MHz band.
Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.
Never miss a story! Stay connected and informed with Mint.
our App Now!!