The spectrum auction that ended after five rounds of bidding on Thursday fetched the government Rs 65,789 crore. While the total spectrum on sale was 2,355 MHz across seven bands, the telecom companies picked up only 965 MHz, or just 41 per cent of it. None of them touched the most expensive 700 MHz band of spectrum. Only the 2100 MHz band, that works well for 4G services but does not carry a high price tag, was sold out. But none of this came as a surprise to either the government or the telecom industry. Companies purchased patches of spectrum they needed to fill gaps in their 4G spread. For the government, the only cause for concern is that the receipts from the auction — Rs 32,000 crore upfront to be paid by telecom companies in 2016-17 — will be less than half of what it estimated, Rs 64,000 crore, in the budget.
All telecom companies attributed the poor results to high pricing of the 700 MHz band of spectrum, which was being auctioned for the first time. During an open house meeting organised by the Telecom Regulatory Authority of India (TRAI) in January this year, the 700 MHz was spoken of by companies as an “uncut diamond”. “Diamond” since it offered the best propagation properties, but “uncut” because the network devices ecosystem around this band is not as pervasive or ubiquitous as it is for some other bands. For instance, in the spectrum bands 2100-2500 MHz, technology makes it possible for networks to switch bands and offer data services quite seamlessly. So, the telecom regulator stuck to the high pricing plan of 700 MHz. Had the entire spectrum in this band been sold, it would have fetched the exchequer over Rs 4 lakh crore of the Rs 5.63 lakh crore value of the total spectrum on offer.
While the government did check with the regulator if putting only half the available airwaves on the block would be a practical idea, the TRAI rightly suggested there was no point in holding it back. It achieved two objectives: Telecom companies could henceforth not point to spectrum unavailability as a reason for poor quality of service or call drops, because they chose not to buy. And second, it conserved the value of 700 MHz spectrum. If it is so good a resource, how would selling it cheap to companies be a great idea? It could always fetch the best price in the next auction.