After 19 days of fierce bidding among eight operators, the auction for telecom spectrum concluded on Wednesday, bringing a record windfall gain of nearly Rs.1.10 lakh crore for the government.
Five rounds of bidding were completed on the last day, taking the total number of rounds in the auctions, which started on March 4, to 115.
“Today, the spectrum auction has concluded at Rs.1,09,874 crore. This is highest ever in history of India. The spectrum auction conducted in 2010 brought about Rs.1.06 lakh crore, which included Rs.30,000 crore payment from BSNL and MTNL. This time all amount is non-BSNL, non-MTNL money,” Telecom Minister Ravi Shankar Prasad said.
This was the biggest ever sale of 2G and 3G airwaves through which the government was expecting to raise about Rs.82,000 crore. Eight firms — Airtel, Vodafone, Idea Cellular, Reliance Communications, Aircel, Reliance Jio Infocom, Uninor and Tata Teleservices — were in the fray to acquire spectrum.
About 11 per cent of the spectrum went unsold.
The government will not announce the name of the successful bidders as a case is pending before the Supreme Court. The next hearing on the case is on Thursday. However, according to sources, Vodafone payout for the spectrum is likely to be the highest, followed by Airtel, Idea, Reliance Jio and Reliance Communications.
The high bidding for spectrum is also likely to impact consumers with call and SMS tariff going up.
Auction fetches Rs.1.10 lakh crore
up for auction
of fierce bidding
rounds of bidding
| The auction includes airwaves held under nine licences of Idea Cellular, seven each of Reliance Telecom and Vodafone and six of Bharti Airtel that are set to expire | Telecos are required to pay upfront 33 per cent of the bid amount for the 2100 MHz, 1800 MHz and 800 MHz bands within 10 calender days of the close of auction. | The winning bidders will pay the rest of the amount over a period of 12 years - two years moratorium and then 10 yearly installments. | |
| Rs.1,09,874 cr: Total value of bids that the government got in spectrum auction | The spectrum auction conducted in 2010 brought about Rs.1.06 lakh crore, which included Rs.30,000 crore payment from BSNL and MTNL |
“The outcome of this auction, in whichever manner, will eventually lead to a significant outflow of funds and further burden the industry, which already remains under a debt of Rs.2.50 lakh crore. The increased financial burden will lead to the industry’s cost structure being changed drastically. Hence, the operators will not be left with much choice but to increase the tariffs so as to meet the financial commitments to the government,” Director-General of industry body COAI Rajan S. Mathews said.
Maximum demand was seen in the 800 MHz and 900 MHz band. The spectrum price in many service areas have gone up by over two-folds compared to base price fixed by government.
According to data released by the government, the reserve price for the provisionally allocated spectrum in 800 MHz band stood at Rs.9,710 crore. However, its provisional winning price was much higher at Rs.17,158.79 crore. Likewise, the reserve price for spectrum provisionally allocated in 900 MHz band was Rs.37,841 crore, while the provisional winning price was Rs.72,964.54 crore.
For spectrum provisionally allocated in 1800 MHz and 2100 Mhz bands, the reserve price was Rs.8,292.40 crore (with provisional winning price Rs.9,636.17 crore) and Rs.9,620 crore (with provisional winning price Rs.10,115.41 crore), respectively.
Analysts are of the opinion that the maximum payment for spectrum by the operators will be made through debt.
“The debt burden for the industry would definitely increase by 70 to 80 per cent of the spectrum price paid. Balance sheets would get further leveraged and profitability and the cash flow would be adversely impacted in servicing of principle and interest and amortisation of spectrum cost,” Deloitte Haskins & Sells Partner Hemant Joshi said.
Depending on the band, carriers will have to pay as much as 33 per cent of their final bid within ten days of the auction’s conclusion and the rest in ten annual instalments starting in 2017. The permits will be valid for 20 years.
