Telecom Spectrum Auction Ends In Failure; Only 11.6% of Target Achieved, 700 Mhz Remains Unsold!
Telecom Ministry had recently put an auction to sell spectrum across these bands: 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz. Total of 31 rounds were planned, but due to lack of interest, the auction was called off in 5 days.
Touted as India’s biggest spectrum auction, on the hindsight of rising 4G usage, the affair proved to be a damp squib. Media has declared the auction as a complete failure, as only 11.6% of the target money was spent by telecom companies.
Total of Rs 65,789 crore was raised by telecom ministry in this auction, against the target of Rs 5.66 lakh crore. This has proved to be a major embarrassment for the telecom ministry, which had pinned high hopes from this auction.
In fact, in this budget, Govt. had predicted revenues of Rs 98,994.93 crore via ‘Other Communication Services’ which in other words was revenue by selling spectrum via auction. Hence, Govt. failed to achieve this target as well.
Interestingly, the amount of spectrum sold was highest in this auction, as telecom firms grabbed the low-end spectrum for 2G, 3G data; irrespective of the fact that the amount collected was low.
Communications Minister, Manoj Sinha made a positive statement after the auction ended, as he said, “This is the highest ever amount garnered in the last five years. This is a cause of happiness. It’s a big achievement that we could sell 965 MHz, which is more than the cumulative amount sold since 2012..”
Why Spectrum Auction Failed?
The reason is simple: High price.
It seems Government failed to calculate the market sentiments, and decided to shoot up the price in anticipation of more revenues.
700 MHz and 800 MHz were especially positioned at a higher price, and telecom firms decided to hold their horses. Besides miscalculated pricing, these spectrum bands are not usable as of now, and telecom firms have decided to wait till the prices stabilized.
As per a statement from Bharti Airtel, 700 and 800m MHz bands have the capability to transform India’s digital network, but high prices set by Govt. has proved to be a major deterrent in their purchase.
On the other hand, Cellular Operators’ Association of India (COAI) stated three factors for the failure to generate more sales during this auction: High and unrealistic pricing, high debt of telecom firms and single digit growth witnessed by telecom operators this year.
Out of 2354 MHz of spectrum put on sale, only 965 MHz was sold; and the majority of buying took place on Day 1 when Rs 53,000 crore was spent on buying various spectrums.
Bharti Airtel bought Rs 14,244 crore worth of spectrum; Reliance Jio bought Rs 13,672 crore of spectrum; Idea Cellular bought Rs 12,798 crore of spectrum. Vodafone hasn’t shared details about their purchase.
Another interesting fact: After the buying, Govt. had expected that Rs 32,000 crore would be paid upfront by the telecom firms; however, only Rs 14,653 crore was furnished upfront by participating telecom firms (Bharti Airtel, Vodafone India, Reliance Jio Infocomm, Reliance Communications, Idea Cellular, Aircel and Tata Telecom).