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Wednesday, January 27, 2021

4G spectrum sale cleared, reserve price lower than TRAI advice

The notice inviting applications from telecom service providers will be issued later this month, and the government hopes to complete the sale by March 2021, Telecom Minister Ravi Shankar Prasad said.

Written by Aashish Aryan | New Delhi | Updated: December 17, 2020 7:19:45 am
4G spectrum sale cleared, reserve price lower than TRAI adviceThe new round of auctions is likely to provide a boost to government revenue collections at a time when its inflows from other sources such as direct taxes, indirect taxes such as goods and services tax, have fallen sharply on account of restrictions to prevent the spread of Covid-19.

The Union Cabinet on Wednesday approved the sale of 2251.25 MHz of spectrum across seven frequency bands at a reserve price of Rs 3.92 lakh crore.

These auctions are only for 4G services, as the Department of Telecommunications (DoT) is yet to finalise the spectrum bands for auction of 5G spectrum.

The notice inviting applications from telecom service providers will be issued later this month, and the government hopes to complete the sale by March 2021, Telecom Minister Ravi Shankar Prasad said.

The new round of auctions is likely to provide a boost to government revenue collections at a time when its inflows from other sources such as direct taxes, indirect taxes such as goods and services tax, have fallen sharply on account of restrictions to prevent the spread of Covid-19.

Incidentally, the reserve price of spectrum being auctioned in this round — in the 700, 800, 900, 1,800, 2,100, 2,300, and 2,500 MHz bands — are lower than the Telecom Regulatory Authority of India’s (TRAI’s) recommendations, which were accepted by the Digital Communications Commission (DCC), the highest executive decision-making body of the DoT.

On December 20, 2019, the DCC had approved the sale of 8,300 MHz spectra across 22 licensed spectrum access (LSA) or telecom circles. It had then decided to accept all the recommendations made by TRAI, including keeping the reserve price at Rs 5.22 lakh crore.

The reduced price of spectrum is in line with the demands made by the three major private telecom service providers, who had expressed reservations on the Rs 5.22 lakh crore reserve price accepted by the DCC. Of the three, Bharti Airtel and Vodafone Idea (Vi) had said they would not be able to bid for spectrum in the new auctions due to high reserve prices.

Both the providers are under pressure following the Supreme Court’s October 2019 ruling on adjusted gross revenue (AGR). The court had ruled that Bharti Airtel and Vi must pay long-pending AGR dues, the penalty for non-payment over the past years, and the interest on penalty for non-payment. Bharti Airtel owes DoT more than Rs 43,000 crore, of which it has paid close to Rs 18,000 crore until now, while Vi owes more than Rs 58,000 crore, of which it has paid nearly Rs 6,900 crore.

Along with the price, the total spectrum on offer has also been reduced by more than a third. The DoT, however, has pinned its hopes on making good money from the auction. In January this year, DoT secretary Anshu Prakash had said that he hoped that the TSPs would bid for spectrum in the 4G band as “telecom operators do require spectrum”.

“I think we should be able to sell it. Their services are expanding, their networks are expanding. There should be good competition in bidding for this. I will wait and watch,” he had said.

The last spectrum auctions were held in 2016, in which the government had offered 2,354.55 MHz at a reserve price of Rs 5.60 lakh crore. But the government was able to sell only 965 MHz, or about 40 per cent of the spectrum that was put up for sale. The total value of bids received then was Rs 65,789 crore.

The validity of the spectrum being sold in these auctions has been kept unchanged at 20 years, along with the other conditions from the 2016 auctions, Prasad said. Telecom service providers (TSPs) and other bidders may choose to pay the entire bid amount upfront, or pay a certain amount now and the remaining in 16 equated annual instalments after a moratorium of 2 years.

As part of the deferred payment plan, bidders for the sub-1 GHz bands of 700, 800 and 900 MHz can opt to pay 25 per cent of the bid amount now, and the rest later.

In the above-1 GHz bands of 1,800, 2,100, 2,300, and 2,500 MHz frequency bands, bidders will have to pay 50 per cent upfront, and can opt to pay the rest in equated annual instalments. The successful bidders will, however, have to pay an AGR of 3 per cent as spectrum usage charges, excluding wireline services.

For the Union Budget 2020-2021, the government had aimed to collect Rs 1.33 lakh crore from telecommunication services. These include spectrum auctions, AGR payments, and receipts of other statutory dues.

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