|Pray for auction failure|
|Wednesday, 10 August 2016 04:07|
Only then will base prices for critical 700 MHz be cut
Given the changed up-front payment rules for auctions—50% of the bid has to be paid immediately as opposed to 33% earlier—the government is certain to meet its budget target of Rs 90,000 crore from the auctions as well as annual license/spectrum charges. Though the 2,353 MHz of spectrum on auction across seven frequency bands is worth Rs 5.6 lakh crore at just the floor prices, few will bid for anything near this. Indeed, the big change is that India is moving to an era of spectrum glut from one of spectrum scarcity even a year ago, a direct result of which will be more reasonable bidding in September, especially since, this time around, telcos know there is plenty more spectrum available. In 2010, when bids first reached astronomical levels, telcos were bidding for 3G spectrum considered to be a game-changer and, in 2014, they had no option but to bid madly since their 900 MHz licenses were expiring and just had to be renewed. This time around, it is true top telcos have to complete their 3G and 4G networks, or add to their capacity, but the industry is already reeling under R 3.5 lakh crore of debt, the subscriber response to 4G has been muted, indeed the growth in data usage is slowing.
None of this means telcos don’t need data spectrum, especially with RJio coming in soon, but the best spectrum is the 700 MHz one which is priced at almost double the 800 MHz one—there is very little spectrum left in the 900 MHz frequency. There is no rational reason for this; indeed, 800 MHz is better since there is already equipment and handsets in the market that work on this, unlike for 700 MHz. Indeed, as FE has pointed out (goo.gl/g4J6jR), Trai used totally incorrect assumptions while doing this. Also, given there are five circles where contiguous 5 MHz blocks of 800 MHz frequency spectrum are available, this will further dampen the demand for 700 MHz. The best option, from the industry’s point of view, will be a failed 700 MHz auction after which the government will cut the base price as happened in 800 MHz. In 2012, while Trai recommended 800 MHz be priced at 2 times the 1800 MHz price, the Cabinet lowered this to 1.3 times—when the auction still failed, the reserve price was further cut by half in 2013. If 700 MHz prices are lowered to reasonable levels, this will be a big relief for industry and will also fetch the government more funds.