Largest spectrum ends with a whimper as it nets Rs 65,789 crore

The largest spectrum auction ended on Thursday elicited a low frequency response with just 964.80 mega Hertz (MHz) of the 2354.55 MHz of spectrum put on the block sold at Rs 65,789 crore crore as highly leveraged bidders stayed away from pricey airwaves in the 700 MHz band.

The value of bids was just 11.6% of the Rs 5.63 lakh crore that the government was expecting from sale of airwaves in seven frequency bands at base prices. The quantum sold was around 41% of the total radiowaves put up for bidding this year.

It was also one of the shortest auctions, wrapped up in five days over 31 rounds with participation from seven telecom companies (telcos).

The revenue earned from spectrum sold will fall way below the Rs 64,000 crore that the government was looking to earn from the auction in the current fiscal.

The tender document floated by the government for bidding states the telcos will have to pay 50% upfront for greater than 1,000 MHz frequency band and for frequency band below that it is 25% upfront.

Department of Telecommunication (DoT) official Shrikant Panda said spectrum in 2,300 MHz band was entirely sold out and other spectrum bands above 1000 MHz such as 1,800 MHz and 2,100 MHz had also seen active bidding.

In the sub-1,000 MHz spectrum bands, except for 800 MHz, others like 700 MHz, and 900 MHz band saw no response.

"They made a clever decision to increase the upfront amount from 33% to 50% for 1000 MHz and above this year. I think, they knew that the 700 MHz will not go through," said G Krishna Kumar, a Bangalore-based telecom executive.

T V Ramachandran, chairman of Assocham's National Council on Telecommunications, said the way auction had been going, he was expecting it to not cross Rs1 lakh crore.

"From the beginning it was obvious that it would not cross Rs1 lakh crore," he said.

According to him, pricing airwaves in the 700 MHz band at Rs 11,485 per unit was strategically a wrong move by the government.

He said the government may go in for another round of auction, where it could bring down the 700 MHz base price by 20-30%, in the current fiscal. The government could have earned over Rs 4 lakh crore from just sale of spectrum in 700 MHz band at its floor price.

Krishna Kumar said pricing of airwaves in this band was a big factor in its failure.

"They (government) could have been a little more strategic in pricing. They could have kept the base prices of airwaves low and let the players fight for them and allowed the market price emerge," he said.

According to him, that way the government could have earned better as there is sufficient demand in the market today.

Ramachandran said that at a high reserve price, whatever little spectrum was bid for went at floor or slightly higher than that.

"If you see there was very little airwaves that went above reserve prices because they were so high. There was no vibrancy in bids and demand. That is not good for an auction. This was almost allocated price," he said.
The Assocham telecom expert also criticised the current norm, which did not permit reserve price of airwaves in any band to be fixed lower than the price at which it was won in the previous auction.

He argued that a new technology always brings down prices of spectrum.

Last year's auction saw 418 MHz spectrum sold at Rs 1.10 lakh crore over 19 days and 115 rounds. The year before that it lasted for 10 days and 68 rounds with the government netting Rs61,000 crore from 399 MHz of airwaves sold.

In this year's Union budget, finance minister Arun Jaitley has estimated a revenue of Rs98,995 crore from communication services. This includes proceeds from the auction, fees and other charges levied by the telecom department.