India's Spectrum Auction Attracts Net Bids of over Rs.1,09,000 crore (Lead)

By: Gizbot Bureau

The e-auction of radio frequency spectrum, or airwaves, for telecom operators concluded Wednesday after 19 days and 115 rounds of rigorous bidding with officials placing the initial estimate of total commitments at over Rs.109,000 crore.

"We are still in the process of putting the figures together. But our preliminary calculations suggest it will be over Rs.109,000 crore," a senior official in the ministry told IANS, giving an initial estimate of the net amount committed, taking into account all the winning bids.

If this figure proves correct, the amount will then surpass the previous high of Rs.106,200 crore that the government had received in the 2010 auction, which was spread over 34 days with 183 rounds of bidding.

India's Spectrum Auction Attracts Net Bids of over Rs.1,09,000 crore

Officials said the names of the successful bidders will not be divulged since the Supreme Court, while allowing the e-auction to proceed, had directed that its consent be taken before awarding spectrum, due to litigations filed by interested parties. The court is to take a call on that Thursday.

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The eight companies that participated in the auction were: Reliance Communications, Reliance Jio, Bharti Airtel, Vodafone India, Tata Teleservices, Uninor, Idea Cellular and Aircel. The winners will have to pay around a third of the winning bid price within 10 days and the rest by 2027.

The central government has budgeted for Rs.43,161.72 crore from e-auctions of spectrum for the current fiscal. The reserve price for the entire spectrum in the four bands on offer, across India, was around Rs.80,000 crore.

The commitment for telecom spectrum comes over and above the Rs.200,000 crore that India Inc has already bid under two phases of auctions for award of coal blocks. But the proceeds from the auction of coal blocks will go to the respective state governments over 30 years.

"I am glad the presumptions some people had, that spectrum is worth zero, have been belied," said Finance Minister Arun Jaitley, referring to the criticism India's official auditor faced when a notional loss of Rs.176,000 crore was assigned for handing over the airwaves without auctions.

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But his predecessor Kapil Sibal of the Congress said the auctions were flawed. "The telecom sector is hugely in debt to the extent of Rs.340,000 crore. Now, in paying for the high spectrum prices, there'll be no money for investment in infrastructure," Sibal told IANS just ahead of the conclusion of the auction.

During the latest auctions, the total spectrum put up for bidding was 103.75 MHz in 800 MHz band, 177.8 MHz in 900 MHz band and 99.2 MHz in 1,800 MHz band for second generation (2G) telephony. Another 5 MHz was in the 2,100 MHz band for 3G services.

A reserve price of Rs.3,423 crore per MHz was fixed for 800 MHz frequency, Rs.3,399 crore for 900 MHz band and Rs.1,425 crore for the 1,800 MHz band. The government also fixed a reserve price of Rs.3,511 crore per MHz for the frequency for 3G spectrum.

Analysts were worried over the impact of the high bid price on the industry and customers.

"The whole auction was designed by the government to extract maximum revenues from the operators. As a result, the industry is going to face financial needs," Rajan S. Mathews, director general of the representative body, Cellular Operators' Association of India, told IANS.

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Pointing to a financial indicator for the industry, analysts quoted GSMA's research body and said while the bidding in India was at global levels, the average revenue per user was already low for Indian operators at $2.55, against $17.65 for Germany, $29.30 for the Netherlands and $28.52 for Britain.

"The spectrum auction outgo will impact on the rollout and quality of telecom network. In this competitive environment, operators will find it difficult to raise data or voice tariffs in the immediate term," said Arpita P. Agarwal, telecom leader for PriceWaterhouseCoopers.

Source: IANS

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