India’s biggest ever spectrum auction is about to take place from 29th of September. A spectrum auction is a procedure in which government uses system of auctioning to sell the rights and licenses for signal transmission over specific bands of electromagnetic spectrum and then to allocate limited spectrum resources. This type of auction can last from one day to many months as it only ends with the final and most profitable bid. This time government is aiming for a bid price up to 5.63 lakh crores as auctioning of mobile phone airwaves through this spectrum auction is going to be one massive event. Interested bidders will have to submit their applications for participating in auction by 13th September.
On releasing the bid document known as Notice Inviting Application (NIA), the Telecom Secretary, J S Deepak said “Large chunk of spectrum is being put for auction which aims to address issue of fragmentation, improve quality of service, and rules have been made bidder friendly.”
The auction by government will put forward mobile airwaves frequencies amounting to a total of 2,354.55 megahertz for auction. These airwaves will be functional in all these bands mentioned in ascending order- 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz and 2500MHz. Each one of them can be easily used by 4G service for its usage. Among these, the one band with 700MHz, which is considered to have most premium and less costly airwaves, will enter into such an auction for the very first time. Reports state that 700MHz band alone can fetch bids of worth Rs 4 lakh crores just through its base price. Any bidder who is keen to buy spectrum in 700MHz band will have to at least a block of 5MHz which amounts to Rs 55,000 crores approximately.
Rajan S Mathews, the Director General of Industry body COAI said, “Quantum spectrum is favorable. There are positives including the fact that contiguous spectrum is now available in all bands, and lock in period has been reduced to one year. But pricing of 700MHz is a concern. We see relatively good demand for 1800MHz band, some demand for 2100 and 2300MHz band. Limited demand for 700, 800 and 900MHz bands. I will be surprised if there are any takers for 2500MHz band.”
While J S Deepak says, “700MHz is the top quality spectrum. It has beaten gold so it is expensive. We will wait for the auctions to see what the response is.”
The news coming from Department of Telecom is suggesting that Norway’s Telenor will not be participating in this spectrum sale due to a possibility of aggressive bids during the auction.
In order to magnetize more bidders, the government for the first time has assured the bidders to assign spectrum within 30 days. Interests on installments have also been reduced from 10% to 9.3%. We can judge how the government is putting in great efforts to make this spectrum auction a great success.
The successful bidder out of all would be permitted to self endorse the network’s roll out to the tune of 90% and 10% would be left to be verified by Department of Telecom’s monitoring system.
As far as the payment methods are concerned, all Telecom companies winning spectrum in 700, 800 or 900MHz band will have to pay at least 25% of the bid amount in around 10 days after the auction concludes. Leftover payment will have to be made in 10 annual installments after two years of moratorium. For bidders who win the rest of the bands, payment will have to be done in 50:50 ratios.
Hemant Joshi, Partner in Deloitte Haskins & Sells LLP, said “In the upcoming spectrum auction, the spectrum is not for renewal and therefore the operators are unlikely to bid aggressively as they would buy spectrum for new services or augment their spectrum holding.”
This time government has planned to allow the winning companies to hold more spectrum compared to earlier levels.
On 13th August, the Department of Telecom will be holding a pre bid conference to discuss over all information mentioned in NIA.
