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Spectrum Auction Approved; Could Fetch Govt Whopping Rs. 5.66 Lakh Crores. Bidding Starts From 1 Sept

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Cell Tower Spectrum Sharing Deal-002

Yesterday the Union Cabinet has approved the upcoming 2016 spectrum auction plan which could fetch the Govt. Rs. 5.66 lakh crore. This is more than twice of the Govt’s revenue of Rs. 2.54 lakh crore from the 2014-15 spectrum auction.

The notice for inviting applications for spectrum auction is likely to be issued on 1st July which would be followed by the pre-bid conference on 6th July. The actual bidding process is expected to commence from 1st September, however the plan are yet to be confirmed officially.

The Most Coveted 700 MHz Band Would Be Up For Sale. Is It About Time?

The sale of the most coveted 700 MHz band would be key highlight of the 2016 Spectrum auctions. Its reserve price would start from Rs. 11,485/MHz and any company wanting to transmit airwaves in this spectrum would need to shell out a minimum of Rs. 57,425 crore for a 5 MHz block in this spectrum.

The reason for such a high reserve price of this spectrum is the fact that it almost 70% more cost efficient than the 2100 MHz band, which is widely used for providing 3G services. In short, it would be the most cost efficient spectrum band in India till date, even better than the 800 MHz band.

However, many leading telecom operators want the Govt. to postpone the auction for the precious 700 MHz waves citing the reason that the necessary ecosystem for the deployment of 700 MHz band is not in place. This would not only lead to its underutilization but would also block telecom operators’ capital for several years.

The panel has also suggested stricter payment norms in contrast to the liberal payment terms suggested by Telecom Regulatory Authority of India (TRAI).

According to the panel, companies with winning bids in the higher frequency band (above 1 GHz) would need to make 50% upfront payment with the rest paid in a 10-year window after 2 years of moratorium. Previously the companies were required to make only 33% upfront payment.

Similarly, telcos acquiring spectrum in sub-GHZ band (700 MHz, 800 MHz, and 900 MHz) would be required to pay 25% upfront and the rest in next 10 years after a 2 year moratorium.

We agree that many telcos would not be in a position to bid for the 700 MHz band but the ones utilizing this band would benefit from low costs and superior network coverage.

We are guessing that the incumbents like Airtel, Idea, and Vodafone would have their eyes glued to this premium band. The same can’t be said about Jio as it already has spectrum sharing and trading agreement with Reliance Communication for the 800 MHz band.

What are your thoughts about this?

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