Government to hold spectrum auction on March 1

The government will commence bidding for the next round of spectrum auction from March 1, for which airwaves worth Rs 3.92 lakh crore is put on the block.

telecom companies, telcos, ARPU, average revenue per user, telcos profit
Given the high interest levels in the past, this increased the AGR dues by almost four times.

The government will commence bidding for the next round of spectrum auction from March 1, for which airwaves worth Rs 3.92 lakh crore is put on the block. A total of 2,251 MHz spectrum in seven bands ranging from 700 MHz to 2500 MHz will be auctioned. The airwaves for 5G won’t be auctioned this time. As per a notice inviting application (NIA) issued by the Department of Telecommunications (DoT), the last date to apply for the auction is February 5. The objectives of the government for the auction include obtaining a market-determined price for spectrum, ensuring efficient use spectrum and avoid hoarding, stimulate competition in the sector and maximizing revenue proceeds.

The Cabinet in December had cleared the modalities for the auction. Despite repeated requests from the industry, the government has not reduced the reserve prices for the spectrum. The Telecom Regulatory Authority of India (Trai) in August 2018 had recommended reserve price for the next round of auctions, which were considerably lower than what was fixed for the 2016 auctions but it was still seen on the higher end, considering the industry’s financial position.

In the premium 4G spectrum (700 MHz), Trai had reduced the reserve price by 43% compared to 2016 auctions, at Rs 6,568 crore per MHz, for a pan-India 5 MHz block, still, operators would have to shell out Rs 32,840 crore, which is seen as quite high. In the 2016 auctions, the government had mopped a total amount of Rs 65,789 crore, 4% over the reserve price, from the country’s six operators who participated in the bidding. However, this was a lukewarm response as only 965 MHz spectra got sold against a total of 2,353 MHz put up on sale, meaning that only 40% got sold.

For this round of auction, given the precarious financial condition of telcos, the government has decided to give a two-year moratorium for making balance payments. For spectrum bands in 700 Mhz, 800 MHz and 900 MHz, an upfront payment amounting to 25% of the winning amount has to be paid upfront while the remaining can be paid in 16 instalments after a two-year moratorium. A 7.3% rate of interest will be charged for the instalments. For bands above 1 GHz like 1800 Mhz, 2100 MHz, 2300 Mhz and 2500 MHz, 50% upfront amount has to be paid while the remaining can be paid in 16 instalments.

Reacting to NIA, industry body COAI said the auction will enable the industry to cater to the exponential increase in data usage which will facilitate in supporting the Digital India vision. “While the government has addressed the requirement for the availability of more spectrum, lowering the reserve prices would have provided additional resources for network expansion to the telcos. High reserve prices in past auctions have resulted in large amounts of spectrum remaining unsold. We hope the Govt. will take additional measures to boost the financial health of the industry, which is the backbone of a digitally connected India,” COAI DG SP Kochhar said.

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First published on: 07-01-2021 at 03:15 IST