Spectrum receipts: Low target shows 5G auction unlikely in FY22

By: |
February 8, 2021 4:30 AM

The government plans to hold auctions for 4G spectrum in March, the proceeds of which would be accounted for in the next fiscal. This auction is for 4G bands of 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2,300 MHz and 2,500 MHz.

By fixing a low revenue receipt target of Rs 53,987 crore from telecommunication services for FY22, the government has signalled it does not plan to hold auctions for 5G spectrum in the 3.5 GHz band in the next fiscal.

The government plans to hold auctions for 4G spectrum in March, the proceeds of which would be accounted for in the next fiscal. This auction is for 4G bands of 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2,300 MHz and 2,500 MHz.

The 4G spectrum auctions were announced by the government late last year, but analysts were expecting that sometime during the latter half of the next fiscal, the government may also hold auctions for the 5G band in 3.5 GHz, but now it seems unlikely.

The quantum of spectrum being put up for auctions in March is worth Rs 3.92 lakh crore at reserve price, which the industry sees as too high. Therefore, participation is expected to be limited to renewing the airwaves which are expiring later this year. Looking at the budget target, it seems the government has accepted this and is looking to garner only around Rs 60,000-70,000 crore from the auctions. Since operators have the option of paying 25% of the total amount bid for spectrum below 1 GHz – like 800 MHz and 900 MHz – and 50% of the total amount bid for spectrum above 1 GHz – like 2,300 MHz or 2,500 MHz – with more spectrum being put up for auctions above 1 GHz, the government would be able to get around Rs 30,000-35,000 crore as upfront payment. Add to this around Rs 20,000 crore which it gets every year as revenue sharing licence fee and spectrum usage charge, the targeted amount of Rs 53,986.72 crore seems achievable.

The realistic assessment of telecom receipts for FY22 comes after the overambitious budgetary target fixed for the current fiscal at Rs 1.33 lakh crore. Either, the government had hoped that the massive adjusted gross revenue (AGR) dues of the operators (which they were required to pay as per the Supreme Court order in October 2019) would come in one go or it expected to conduct auctions in the current fiscal from which it may have expected too high a sum.

The revised estimate from telecom receipts for the current fiscal has been sharply brought down to Rs 33,737 crore.

In the last 7-8 years, the government has been able to achieve the budget estimate from telecom receipts only twice.

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