Friday, October 7th, 2016

Spectrum Auction 2016: Missed target, but most successful auction

Narada Desk | October 7, 2016 3:00 pm Print
The seven leading telcos participated in the auction-- Reliance Jio, Vodafone, Idea Cellular, Tata Teleservices, Reliance Communications and Aircel, where they bought airwaves that will be valid for 20 years

The five-day long auction of telecom spectrum ended on Thursday, with the government raising Rs 65,789.12 crore, much less than the expectation. Even after missing the target, spectrum auction of October 1-6 has become the highest in its history.

The spectrum put up on sale was worth Rs 5.63 trillion for 2,354.55 MHz of radio waves. The government sold 41% at around 965 MHz. The seven leading telcos participated in the auction — Reliance Jio, Vodafone, Idea Cellular, Tata Teleservices, Reliance Communications and Aircel, where they bought airwaves that will be valid for 20 years.

Telecom minister Manoj Sinha said, “I think it is a successful auction and a big achievement. The total upfront (payment of) Rs32,000 crore is the highest upfront payment received in five years. Wherever companies wanted to improve data services, they have bid accordingly. For some spectrum, ecosystem was not ready and so has not been sold.”

The government will receive the revenue in line with new norms that require telcos to pay 25% of the price upfront for spectrum in the 700, 800 and 900MHz bands and 50% for higher frequencies. Payments will have to be made in 10 days after the sales are approved.

The government offered spectrum in seven bands: 700MHz, 900MHz, 1,800MHz, 2,100MHz , 2,300MHz and 2,500MHz. As per the base price set by the Telecom Regulatory Authority of India, the premium 700MHz band alone had the potential to fetch bids worth over Rs4 trillion, but the band remained unsold, along with 900MHz band.

India’s largest telecom, Bharti Airtel Ltd, in a statement said that it has acquired 173.8MHz of spectrum across the 1,800/2,100/2,300MHz bands for a total consideration of Rs14,244 crore.

“Airtel has further strengthened its pan-India spectrum portfolio and secured its spectrum requirements for the next 20 years. The company now has 4G and 3G spectrum in all circles, giving it the widest mobile broadband footprint across the country,” it said.

Vodafone India Ltd spent more than Rs 20,000 crore in the spectrum auction, a person familiar with the development said.

Reliance Jio, announced that it has acquired the rights to use 269.2MHz of spectrum across all 22 service areas for Rs 13,672 crore.

“We have expanded our spectrum footprint thereby significantly enhancing capacity of our all-IP data strong network and ensuring world class services for all Indians. Jio is committed to taking India to global digital leadership by bringing the power of data to all Indians,” said Reliance Industries chairman Mukesh Ambani.

Idea Cellular Ltd said it had secured a pan-India wireless broadband footprint in the auction. Idea acquired 349.20 MHz of spectrum at an aggregate bid value of Rs 12,798 crore.

“Idea has filled all of its spectrum coverage requirements, while procuring a substantial part of its broadband capacity needs for the next decade. The company will now focus on expanding its wireless broadband presence primarily on 4G LTE technology to over a billion Indians while offering world class high speed digital customer experience like never before,” said Kumar Mangalam Birla, chairman of Idea Cellular.

Bidding activity took place largely around the 1800 MHz and 2300 MHz airwaves, which will help the telcos improve their 4G services. The companies also picked up the 2100 Mhz (3G/4G) band, 2500 Mhz (4G) band and 800 Mhz (2G/4G) bands.

The shortfall may force the government to conduct another sale of spectrum in a couple of years when it is likely to lower the reserve price of the spectrum, especially in the 700MHz and 900MHz bands, Bloomberg had reported citing unnamed government officials.

The telecom industry is debt ridden, with single digit growth at best. Companies have also been cautious about opting for low-price spectrum which would help them improve service quality and offer next generation services.

“The lack of enthusiasm was majorly due to its unrealistic pricing, high debt and single-digit growth that the industry is currently reeling under,” COAI’s Mathews said.

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