Next round of spectrum auction in Feb

The Government plans to conduct the next round of spectrum auction in February next year in a bid to meet revenue targets for this fiscal. According to the plan, airwaves in 800 MHz, 900 MHz and 1800 MHz bands will be put up for sale starting February 3.

Budget 2014-15 has projected a revenue of ₹9,355 crore from the auctions. An additional ₹5,000 crore can be earned if the Defence vacates 3G spectrum in the 2,100 MHz band.

This auction is important because as many as 29 licences belonging to Airtel, Vodafone, Idea Cellular and Reliance Communications are set to expire next year. Since the Government has decided not to extend the licence period beyond the initially set 20 years, these players will have to buy back spectrum through the auction if they want to remain in business.

According to Hemant Joshi, Partner, Deloitte Haskins & Sells, “The Government should make available significant amount of spectrum across all the bands, so that all players have the choice and incentive to take part in the auctions.”

The Government plans to sell over 300 MHz of spectrum in the various bands. The process will start in the second week of August for the selection of auctioneer.

The revenue estimates from the auction are lower compared to the sale in February, when operators put in bids worth ₹61,000 crore. That could be because the total quantum of spectrum being sold is lower than last time. Also, part of the airwaves being auctioned is the portion left unsold in February. If the spectrum did not find takers five months ago, it is unlikely to find buyers in the next round either.

The other dampener is the lack of contiguous 5MHz spectrum in many areas. Operators prefer spectrum that is bunched together as they can use it for data services and it helps in better network planning.

Airwaves that are broken up are valued lower. But if the Government manages to get the Defence to vacate at least 15 MHz spectrum in the 3G band, then the accruals could be higher. None of the existing 3G players has pan-India footprint, so additional spectrum would be lapped up.