Lack of industry preparedness impacting the spectrum auction participation: ICRA

At a time when there are talks to provide some incentives to the industry, which is ailing with pressure on profitability a mega spectrum auction definitely appears counter-intuitive.

According to the new report by ICRA, the telecom industry is not prepared for a spectrum auction of such scale at least for one year as undergoing many structural changes which will continue to absorb the bandwidth of the operators for some time.

Lack of industry preparedness impacting the spectrum auction

Harsh Jagnani, Sector Head and Vice President, Corporate Ratings, ICRA Limited said that "Entry of a new operator led to a bruising price competition amongst the telcos, and a stable pricing regime is still some time away. New pricing plans and products (such as 4G-enabled smartphones) are keeping the industry dynamic.

He said, "In addition, many important and sizeable merger transactions are under process which will materially alter the industry structure. On top of all these factors, the industry is reeling under high debt level, which coupled with deterioration in financials raises questions on the capability of the industry to participate in the auctions. We expect that most of these issues will take at least a year to settle, till which time the operators will find it difficult to decide on their spectrum strategy. Also, the fact that operators hold unutilized spectrum and do not face major expires till FY2022 alleviate the urgency for auction."

At a time when there are talks to provide some incentives to the industry, which is ailing with pressure on profitability, high repayment burden of elevated debt levels, and high capex requirements, a mega spectrum auction definitely appears counter-intuitive, ICRA said.

Lack of industry preparedness impacting the spectrum auction participation has been evidenced in the past as well. Till now, the telecom industry in India has witnessed six rounds of auctions.

ICRA further said that, over the last seven years, the industry has spent a total of Rs. 356,137 crore for acquisition of 3128.5 MHz of spectrum across various bands. After the February 2014 and March 2015 auctions which witnessed enthusiastic participation by the telcos, exacerbated by impending expires for many operators, October 2016 auctions witnessed muted participation, with 59 percent spectrum put to auction remaining unsold. Further, the next major spectrum expiries are due in FY2022, diminishing the necessity of auctions.

The statement comes after Telecom Regulatory Authority Of India ( TRAI) issued a consultation paper on spectrum auction in 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz, 3300-3400 MHz and 3400-3600 MHz bands'.

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