After 19 days and 115 rounds of intense bidding, the spectrum auction came to an end on Wednesday. The Centre will get about ₹1.10 lakh crore from the sale, which is the highest revenue generated from spectrum auctions over the last 5 years. The spectrum is valid for 20 years.
While that is good news for the exchequer, the high cost will also mean an increase in tariffs for consumers, as telecom companies will try to protect their debt-laden balance sheets.
Though the Government did not disclose the names of the winners, trends indicate incumbents Airtel, Vodafone and Idea Cellular have been able to protect their holdings. Reliance Jio, Tata Teleservices, Reliance Communications, Aircel and Uninor were the other bidders. A clearer picture on who has won what will emerge after the Supreme Court hears a plea by companies challenging the auction.
According to the data released by the Department of Telecom (DoT) at the end of the auction, the bidding was driven by the 900 MHz and the 800 MHz bands. Operators bought spectrum at an 80-95 per cent premium over the reserve price. Uttar Pradesh saw the topmost bid of ₹7,756 crore per MHz. The lowest bid was for 1800 MHz band in the North East at ₹110 crore.
Awaiting payment Commenting on the successful bidding by all the eight participating companies, Finance Minister, Arun Jaitley, said: “I do hope the payments start coming in. In any case I am glad the presumption that some people had on the worth of spectrum being zero, would have been belied.”
The 900MHz band fetched the maximum revenues of ₹72,964.54 crore and 800 MHz saw bids worth ₹17,158.79 crore. Demand for the 1800 MHz and 2100 Mhz bands was muted, with the final bid price ending just over 5-16 per cent over the reserve price. There are three possible outcomes from the auction.
First the exchequer may get the money only in the next fiscal year, with court hearings yet to conclude.
Second, telecom tariffs may rise by about 10 per cent. “The auction will change cost structures. It is inevitable that tariffs will rise,” said Rajan Mathews, Director General, Cellular Operators Association of India (COAI).
Third, there will be consolidation as operators’ balance sheets get stressed. “Such bids will also mean a higher debt burden. It would definitely increase by 70-80 per cent of the spectrum price paid,” said Hemant Joshi, Partner, Deloitte Haskins & Sells.
He said balance sheets would get leveraged further and profitability and cash flow would be impacted. “The Government has won but whether industry will win depends on how the money is used to build infrastructure.Will Digital India get the right priorit? Time will tell,” he said.