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7
October 2016
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| telecom-spectrum (The Total Investment & Insurance Solutions) |
India's telecom spectrum auction --
touted as the largest, given the quantum of airwaves on the block -- ended in a
virtual failure, closing within five days with a total commitment of only Rs
65,789 ($9.8 billion) crore, or about 11.6 per cent of the expected Rs 5.66
lakh crore ($8.5 billion). The Total Investment & Insurance
Solutions
The failure has been attributed to
the high reserve price decided by the regulator and approved by the central
government.
The Total Investment & Insurance Solutions
"It is a failure to an extent.
The largest chunk of spectrum didn't find any buyers because of serious
miscalculation by the regulator and the central government on the current
market value of 700 MHz spectrum. They overpriced it and the players decided to
wait till the price becomes more realistic," said Mahesh Uppal, Director
of telecom consultancy Com First.
A total 2,354 MHz of spectrum was
put on block for e-auctioning, but only 965 MHz were sold -- or just 41 per
cent of what was on offer. The money raised on the first day, of around Rs
53,000 crore, was an early portent that not everyone was enthusiastic about
bidding for the airwaves. Even the earnest money deposit was low. The Total Investment
& Insurance Solutions
The auction went through 31 rounds
for seven bands --700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz
and 2,500 MHz. There were no takers for 700 MHz and 900 MHz -- as had been
warned by experts and the industry alike.
But Communications Minister Manoj
Sinha tried to put a positive spin on the money to be raised. The Total Investment
& Insurance Solutions
"The total upfront payment due
to the government is around Rs 32,000 crore. This is the highest in the last
five years.
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"It's a big achievement that we
could sell 965 MHz," he said.
Top investment banker Goldman Sachs
had predicted that the total proceeds from the auction will be around $7
billion -- less than half of $16 billion obtained in the 2015 auction, and
sharply below $85 billion if all spectrum was sold at the reserve price.
The Cellular Operators' Association
of India (COAI) said the lack of enthusiasm on the operators' part was majorly
due to unrealistic pricing, high debt and single-digit growth that the industry
is currently reeling under. The Total Investment & Insurance
Solutions
"We are hopeful the government
and the Department of Telecommunications will take cognizance of the role a
high reserve price had on bidding, as far as the 700 MHz is concerned, and will
re-calibrate the price so that spectrum in the band could be put up for
auction, maybe two years from now," said its Director General Rajan S
Mathews.
Bharti Airtel, India's largest
telecom services provider, on Thursday said that it has acquired 173.8 Mhz of
spectrum across 1,800 MHz, 2,100 MHz and 2,300 MHz bands for a total
consideration of Rs 14,244 crore. The Total Investment & Insurance
Solutions
The new entrant, Reliance Jio, said
it has acquired 269.2 MHz spectrum for Rs 13,672 crore.
"We have expanded our spectrum
footprint thereby significantly enhancing capacity of our all-IP data strong
network and ensuring world class services for all Indians. Jio is committed to
taking India to global digital leadership by bringing the power of data to all
Indians," said Reliance Industries Chairman Mukesh D. Ambani. The Total Investment
& Insurance Solutions
Another key player, Idea Cellular,
said it has acquired 349.20 MHz of spectrum for Rs 12,798 crore. "Idea is
now well equipped to offer 4G services on its own spectrum across 20 service
areas," it said. The Total Investment & Insurance Solutions
The auction would also fail to help
in fully realising the revenue target of Rs 98,994.93 crore that had been
provided for in the budget for this year against 'other communications
services' -- the bulk of which is scheduled from the fee paid for spectrum.
Other companies participating in the
auction were Vodafone India, Reliance Communications, Aircel and Tata Tele, all
together furnishing a total earnest money of Rs 14,653 crore.
The total amount of money committed
through the auction will not immediately come to the government as the
operators have been given the option of both upfront and deferred payment.
The biggest telecom auction did not
start too well on Saturday with subsequent days seeing only marginal increments
taking the amount to Rs 65,789.12 crore on the fifth day, when the process had
to be called off for lack of further interest. The Total Investment
& Insurance Solutions
Highlights:
Band (MHz) Quantity put to auction
(MHz) Quantity sold (MHz)
700 770 0
800 73.75 15
900 9.4 0
1800 221.6 174.8
2100 360 85
2300 320 320
2500 600 370
The Total Investment
& Insurance Solutions
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