Spectrum auction day 3: Operators still shy of the coveted frequency

By the end of six bidding rounds conducted on Tuesday, total bids worth approximately Rs 60,969 crore were placed on the govt’s table.

By: ENS Economic Bureau | New Delhi | Published:October 5, 2016 1:59 am
spectrum auction, spectrum auction day 3, reliance jio, telecom spectrum auction, bharti airtel, vodafone, idea cellular, spectrum auction, spectrum, tech news, technology, business news The government set a reserve price of Rs 11,485 crore per megahertz for the spectrum in 700 MHz band, as suggested by the Telecom Regulatory Authority of India (Trai).

The Centre’s bets on the coveted 700 MHz band to rake in revenues seem far from reality with operators placing no bids for the expensive frequency in the ongoing spectrum auction, which has neared 100 per cent activity at the end of the third day of bidding, indicating an early close of the process.

By the end of six bidding rounds conducted on Tuesday, total bids worth approximately Rs 60,969 crore were placed on the government’s table, but none for the 700 MHz band, which comprises nearly 70 per cent of the spectrum put up for sale in value terms. The government set a reserve price of Rs 11,485 crore per megahertz for the spectrum in 700 MHz band, as suggested by the Telecom Regulatory Authority of India (Trai).

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The Department of Telecommunications (DoT) had put 2,354.55 MHz of frequencies valued at Rs 5.63 lakh crore at base price under the hammer, of which 700 MHz band is worth nearly Rs 4 lakh crore. In the Union Budget for 2016-17, the finance ministry had pegged the revenue target at Rs 98,995 crore from the telecom ministry including Rs 64,000 crore from the auction. But it must be noted that the DoT will only receive a part of the total winning amount as upfront payment.

Going ahead, experts believe that it would be important for the government to relook at the said frequency’s rates, as it did before for the 800 MHz band when high prices deterred the operators from bidding, and got picked up later when the rates were revised.

“It is very important for the government to revisit the prices of 700 MHz as no bids have been placed. Everybody knows it is an efficient spectrum, and its usability is not in question, it’s price is in question. From today’s result it’s clear that it doesn’t make sense,” said Prashant Singhal, global leader for telecom practice at EY.

In its recommendations to the government in January, the Trai said that while the device and equipment ecosystem for the 700 MHz band is still in a nascent stage, auctioning the airwaves would “act as a catalyst for faster development of ecosystem in this band”.

The 700 MHz band is used worldwide for deployment of 4G due to its propagation characteristics that make it more efficient than other bands allowing it higher penetration capability inside buildings. Due to lower frequency it is also possible for the band to provide wider coverage, which reduces number of towers required for setting up LTE network.

However, Singhal said that the trade off between the high price of the spectrum and its comparatively less rollout cost was not enough.

“If the infrastructure cost is going to be two to three times higher in 1800 MHz compared with that of 700 MHz, spectrum price of 700 MHz cannot be five times higher. That is where the mismatch is,” he said.

An analyst with a domestic consultancy firm said that it was imperative for the government to revise the prices of 700 MHz as it would remain a key hurdle to development of the device ecosystem for the spectrum, which could help roll out high quality mobile internet in the country.

Even as the spectrum auction is in its final stages, Singhal said an operator might just pick up airwaves in the 700 MHz band at the last minute.

“Anybody can pick it up at the last minute but it doesn’t look like that could happen. There may be a very few lower rung category circles that can be picked up at the last moment, but it’s very unlikely,” he said.

As the auction process nears its end, on Tuesday, the bidding largely witnessed a high demand for Mumbai circle in 1,800 MHz causing a price increment in round 18 that will begin Wednesday. Apart from this, several other circles in the band such as Jammu & Kashmir, Assam, Maharashtra and West Bengal saw intense bidding by operators. In the 800 MHz band, Rajasthan circle saw high demand in with a price increment applicable for the next round.