1. Spectrum auction ends: Centre mops up Rs 65,789 cr; to miss budgetary target

Spectrum auction ends: Centre mops up Rs 65,789 cr; to miss budgetary target

The spectrum auction concluded on Thursday with the Centre mopping a total amount of R65,789 crore, 4% above the reserve price, from the country’s six operators who participated.

By: | New Delhi | Published: October 7, 2016 6:32 AM
telecom-tower-reuters.l The other setback for the government will be that it will miss its budgetary target from telecom receipts in FY17, which was set at R99,000 crore, of which R64,000 crore was from auctions. (Source: Reuters)

The spectrum auction concluded on Thursday with the Centre mopping a total amount of R65,789 crore, 4% above the reserve price, from the country’s six operators who participated. But what signals a lukewarm response to the auction is the fact that the only 965 MHz spectrum got sold against a total of 2353 MHz put up on sale by the government — in effect, only 40% got sold.

The other setback for the government will be that it will miss its budgetary target from telecom receipts in FY17, which was set at R99,000 crore, of which R64,000 crore was from auctions.

Operators do not pay the full amount upfront but 50% of the total amount of spectrum sold in bands of over 1 GHz and 25% below that. Going by this, the total upfront money the government will get from the auctions is R32,007 crore. Add to this R25,000 crore from spectrum usage charge and licence fee and R20,000 crore from the first instalment of 2014 auctions and the amount goes to up to R77,007 crore.

The reason for the government failing to raise the desired amount is there were no takers for the 700 MHz band, priced at a steep R11,485 crore per MHz. Also, as this was the first time no licences were getting renewed, operators did not bid desperately but in a calculated way to fill the gaps in their portfolios. Thus, the price rise over the reserve price was either negligible or none. For instance, in 1800 MHz, the price increase over reserve price was 6.8%, in 2100 MHz it was 0.1%, for 2500 MHz too 0.1%, in 2300 MHz it was 4.4% and for 800 MHz around 9%.

Only 15 MHz spectrum was sold in the 800 MHz band out of a total of 73.75 MHz. In 1800 MHz, 175 MHz was sold against 221 MHz put on sale. In 2100 MHz only 85 MHz was sold against 360 MHz. In 2300 MHz, all spectrum was sold, whereas in 2500 MHz 370 MHz was sold against 600 MHz.

Among the operators, Vodafone India, the country’s second biggest operator, emerged as the biggest gainer by spending more than Rs 20,000 crore on spectrum, followed by industry leader Bharti Airtel, which bought spectrum worth Rs 14,244 crore. Idea’s spend was Rs 12,798 crore and Reliance Jio Infocomm’s around Rs 13,500 crore. Bharti, Vodafone and Idea have beefed up spectrum in the 1800/2100/2300 MHZ bands.

In a statement, Bharti Airtel said it has acquired 173.8 MHz of spectrum across 1800/2100/2300 MHz bands for a total consideration of Rs 14,244 crore in the latest spectrum auctions, which means the company will have spectrum to offer high-speed 3G/4G services in 77 more circles, expanding its coverage across the country, directly pitching against new entrant Reliance Jio. Bharti has also bought some partial blocks, giving it a second carrier for its future needs.

“We are hopeful the government and the DoT will take cognizance of the role of a high reserve price had on bidding, as far as the 700MHz is concerned, and will recalibrate the price so that spectrum in the band could be put up for auction, may be two years from now,” Rajan S Mathews, director-general of the Cellular Operators Association of India, said in a statement, reacting to the outcome of the auctions.

Among the bands, operators chose to pick up 800 MHz in the four circles of Gujarat, Punjab, Rajasthan and Uttar Pradesh (east), with Punjab and Rajasthan seeing a price increase of 14.8% and 13.7%, respectively, over the reserve price.

In the 1800 MHz band, only Mumbai saw a 64% price increase on the final day of bidding, as operators chose to pick up frequencies in almost 19 circles where the bandwidth was put on block. Interestingly, operators also chose to bid for Mumbai in the 2100 MHz band at the reserve price on the final day, picking a block at Rs 2,305 crore, adding one more circle of bidding on Thursday.

Please Wait while comments are loading...

Go to Top