Cabinet okays largest ever spectrum auction to get Rs 64,840 cr

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New Delhi | January 05, 2015 10:28 PM

The Union Cabinet approved the largest ever telecom spectrum auction that is targeted to fetch at least...

The government will sell 380.75 megahertz of second generation (2G) spectrum in three bands. ReutersThe government will sell 380.75 megahertz of second generation (2G) spectrum in three bands. Reuters

The Union Cabinet today approved the largest ever telecom spectrum auction that is targeted to fetch at least Rs 64,840 crore from the sale next month.

The government will sell 380.75 megahertz of second generation (2G) spectrum in three bands — the premium 900 MHz, 1800 MHz and 800 MHz. Spectrum in 2100 MHz may also be put on auction simultaneously after Defence Ministry vacates it.

The Cabinet, headed by Prime Minister Narendra Modi, approved a reserve price of “Rs 3646 crore pan-India per MHz in 800 MHz, Rs 3980 crore for 900 MHz band pan India excluding Delhi, Mumbai, Kolkata, and J&K; Rs 2191 crore pan India (excluding Maharashtra and West Bengal) in 1800 MHz band,” an official statement said here today.

Reserve price for 2,100 MHz was not announced today.

Government had garnered about Rs 62,162 crore from the last auction in February 2014.

Proceeds from this year’s auction will help government reach its fiscal deficit target of 4.1 per cent of GDP.

As per the tentative timelines drawn by the Department of Telecommunications (DoT), last date for submission of application is February 2 and bidders will be pre-qualified by February 13. The auction will start on February 23.

Telecom Minister Ravi Shankar Prasad said the government intends to auction third generation or 3G spectrum in 2,100 MHz simultaneously.

“What had been pending for last many years, that is 5 MHz in 2,100 MHz from Defence, we have been able to do it,” he told PTI.

The focus of the February auction, he said, “is to provide adequate spectrum, prevent hoarding, fair competition, improve telecom services for consumers and adequate revenue for government.”

The reserve or auction start price approved today is the same as the one recommended by the Telecom Commission, except in the case of 900 MHz. The Telecom Commission had proposed a reserve price of Rs 3,695 crore for each MHz in 900 Mhz. Against this, Cabinet approved reserve price of Rs 3980 crore.

“The estimated revenues from this auction are Rs 64,840 crore (excluding 2100 MHz spectrum) of which Rs 16,000 crore is expected to be realized in the current financial year,” the statement said.

At the reserve price of last auction, airwaves were valued at about Rs 48,685 crore.

Government had put on the block about 385 MHz of radiowaves in 1800 MHz band, and 46 MHz in 900 MHz band. During that auction, all the spectrum in 900 MHz band got sold but 78 Mhz in 1800 MHz band remained unsold.

Any company holding a universal service license to provide telephony services or eligible to obtain the same, can bid in this year’s auction.

Successful bidders have to pay within 10 days 33 per cent of the final sale price in case of 1800 MHz. The same is 25 per cent in case of 900 MHz and 800 MHz, the statement said.

“There shall be a moratorium of two years for payment of balance amount of one time charges for the spectrum, which shall be recovered in 10 equal annual installments,” it said.

In 800 MHz band, 103.75 MHz in all service areas is being put on auction while 177.8 MHz in 900 MHz band is being sold in 17 telecom circles or service areas. 99.2 MHz will be auctioned in 15 circles in 1800 MHz band, it said.

There are total 22 telecom service areas in the country and the price of spectrum in each circle is different.

Telecom Commission has recommended auctioning 184 Mhz in 900 Mhz band across 18 service areas and 100.2 Mhz in 1800 Mhz band in 15 service areas. The quantum of spectrum for auction in 1800 Mhz has been reduced by Cabinet.

The 900 Mhz and 1800 Mhz band are used for providing GSM based mobile services by companies like Airtel, Vodafone, Idea, Uninor. The 800 Mhz band is used for CDMA based mobile services by companies like MTS, Tata Teleservices and Reliance Communications.

The base price of Rs 3,980 crore for each megahertz of spectrum in premium 900 Mhz band for the upcoming auction, is over 10 times higher than what telecom operators paid earlier.

The spectrum in 900 Mhz held by Airtel, Vodafone, Idea and RCom through their licences is expiring in 2015-16. These are being put up for auction.

The base price of Rs 3,646 crore per Mhz for 800 Mhz (CDMA) band– nearly 17 per cent higher than the price suggested by Trai. It is also more than base price fixed by government for November 2012 auction.

There were no buyers of CDMA spectrum in November 2012 auction as companies felt spectrum price was too high to make a business case.

MTNL has proposed to surrender its CDMA spectrum in Delhi and Mumbai. BSNL has proposed to surrender one block of 1.25 Mhz CDMA spectrum in 10 service areas. As per DoT, after taking into account CDMA spectrum of MTNL and BSNL, only 103.75 Mhz can be placed for auction in February.

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