Telcos billed Rs 1.47 lakh crore, govt now wants spectrum auction

At a time when the cash-strapped telecom operators have been saddled with a massive Rs 1.47-lakh-crore burden arising out of adjusted gross revenue dues and have stated that if no relief is provided some will shut shop, the government has gone ahead and approved auction of 8300 MHz spectrum worth Rs 5.22 lakh crore. The plan is to hold the auctions in March-April, 2020, just months after January 24 by when the operators need to pay the AGR dues.

The approval by the Digital Communications Commission, the apex policy-making, inter-ministerial body of the department of telecommunications, on Friday came even though the operators in the past have said that if auctions are conducted there would be no buyers.

While deciding to hold the auctions, the DCC has stuck to the reserve price recommended by the Telecom Regulatory Authority of India in 2018, which has been termed high by the industry.

This means for the 5G band in the 3300-3600 MHz where the auction would be held for the first time, at a reserve price of Rs 492 crore per MHz, for a pan-India minimum block of 20 MHz, operators will have to shell out Rs 9,840 crore, which is seen as steep.

Similarly, for the premium 4G spectrum at a reserve price of Rs 6,568 crore per MHz, for a pan-India 5 MHz block, operators would have to shell out Rs 32,840 crore.

The last auctions were held in 2016, just before the commercial launch of Reliance Jio and the ensuing tariff war, so relatively the financial health of the operators was better than today. Still, the government was able to mop up Rs 65,789 crore, which was just 4% over the reserve price, from the country’s six operators who participated in the bidding. This was a lukewarm response as only 965 MHz spectrum got sold against a total of 2353 MHz put up on sale, meaning that only 40% got sold.

While the 700 MHz had seen no takers, 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.

For the upcoming auctions, Trai had initially given recommendation for auction of spectrum valued at Rs 4.9 lakh crore. However, the DoT has also included additional spectrum for the auction which will be free from expiry of licences of Reliance Communications, Bharti Airtel in 8 circles and Vodafone and Idea Cellular in 4 circles each.

Successful bidders will have to pay 25% of the amount upfront for sub-1 GHz, and 50% upfront for higher frequency bands. For spectrum that would not be available with the government at the time of auction but will be freed only by December 2021, operators need to pay only 10% as upfront amount for sub-1 GHz bands and 20% for bands above 1 GHz.

Instalments will be spread over a period of 16 years. There will be a two-year moratorium for payment after the upfront amount is given. This means that instalment will have to be paid from third year, in 16 annual instalments.

The Trai had recommended auction of spectrum in the 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz, 3300-3400 MHz and 3400-3600 MHz bands.

Source: Financial Express