The Union Cabinet on Wednesday authorized the subsequent round of spectrum auctions to be held in March. However, with the government not lowering the cost of the premium 4G band (700 MHz) – its second try to sell it right after the initially one particular in 2016 located no bids – it is unlikely that the operators would bid for it. If it finds no takers, the government would after once again obtain itself falling brief of its income targets and would be left with substantial unsold spectrum.
Of the total 2,251 MHz of spectrum worth Rs 3.92 lakh crore at reserve cost in the 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz bands which would be place up for auctions, the government can mop up a total of about Rs 1.09 lakh crore, assuming there’s no participation for 700 MHz band. This would be about 27% of the total worth. This is the most effective-case situation and if operators like Bharti Airtel or Vodafone Idea determine not to renew some chunks of their 1800 MHz spectrum considering the fact that they are presently becoming applied for 2G services and they have sufficient spectrum in the very same band for supplying 4G services, the actual quantity could be reduce.
The reserve cost for the premium 4G spectrum (700 MHz) stands at Rs 6,568 crore per MHz for a pan-India 5 MHz block, which suggests that the operators would have to shell out Rs 32,840 crore. It is unlikely that the operators are going to bid for it. This cost even though is 43% reduce than what was fixed for the 2016 auctions when also no operator bid for it. This time as the quantity of operators have lowered to only 3, the sector is not in a desperate scenario and can normally wait for costs to come down even additional in future to bid for it.
If the government falls brief of its target and is left with unsold spectrum, it would not be for the initially time. In the 2016 auctions, the government had mopped a total quantity of Rs 65,789 crore, which was 4% more than reserve cost, and six operators had participated in the bidding. The response was deemed lukewarm as only 965 MHz spectrum got sold against a total of 2353 MHz place up for sale, which means only 40% got sold.
In the forthcoming auctions, the technique of the operators would be to renew what is expiring and choose up chunks to fill their current gaps. In terms of renewal the greatest chunk is in the share of Reliance Jio. Its 81.25 MHz spectrum in 800 MHz, which is applied for supplying 4G services, is expiring subsequent year. Bharti Airtel’s total of 57.60 MHz is expiring, of which bulk 51.40 MHz is in 1800 MHz and 6.20 MHz is in the 900 MHz band. In the case of Vodafone Idea, a total 51.05 MHz spectrum is expiring, of which once again bulk of 51.05 MHz is in 1800 MHz when 6.20 MHz falls in the 900 MHz band.
Going by renewals and filling the gaps in spectrum portfolio, the most likely outflow of Jio could be Rs 57,790 crore. Since operators require to spend 25% as upfront payment and can spend the remaining more than a period of 16 years, Jio’s upfront payment would come to about Rs 14,400 crore.
Bharti Airtel’s total outflow could be Rs 34,023 crore and at 25% upfront payment would require to spend about Rs 8,500 crore. In the case of Vodafone Idea, the total outlflow could be Rs 17,908 crore and upfront payment would be about Rs 4,400 crore.