Telecom Panel favours sale of all available spectrum

Government is expected to earn up to Rs. 5.36 lakh crore by spectrum auction scheduled to take place next year.

Government is expected to earn up to Rs. 5.36 lakh crore by spectrum auction scheduled to take place next year.

The Telecom Commission today favoured putting all available spectrum for auction at price suggested by sectoral regulator TRAI, which could fetch the exchequer around Rs 5.36 lakh crore.

“TC is of the view that all available spectrum should be put for auction at TRAI-recommended price in the upcoming auction. It will be send to the Cabinet for final approval,” a source said.

The auction is to be held in July and would include sale of most premium 700 Mhz band at a price of Rs 11,485 crore per Mhz. The cost of delivering mobile services in this band is estimated to be around 70 per cent lower than 2100 Mhz band, used for providing 3G services.

As per the rule approved by the inter-ministerial panel chaired by telecom secretary J S Deepak, a company interested in buying spectrum in 700 Mhz band will need to shell out a minimum of Rs 57,425 crore for a block of 5Mhz on pan-India basis. This band alone has the potential to fetch bids of over Rs 4 lakh crore.

The total potential revenue of Rs 5.36 lakh crore from the spectrum sale is more than double of telecom services industry gross revenue of Rs 2.54 lakh crore reported in 2014-15 financial year.

Leading operators have requested to defer sale of 700 MHz spectrum, saying that ecosystem for providing services in this band was not developed and sale would lead to underutilisation of the spectrum for several years and block industry’s fund.

As per global body industry body GSMA, the total recommended reserve price for the auction is almost double the cost of all spectrum investment to date in India and more than 20 times the annual free cash flow of the entire mobile industry.

The government expects a revenue of Rs 98,995 crore from the sector in 2016-17, which includes proceeds from spectrum auction and other fees levied by the DoT.

The panel has also suggested stringent payment conditions compared to liberal method suggested by Telecom Regulatory Authority of India.

The panel has favoured that companies winning spectrum in higher frequency bands — above 1Ghz like 1800 Mhz, 2100 hz, 2300 Mhz — should make 50 per cent upfront payment and rest in 10 years after a 2-year moratorium. In earlier auctions, companies were given option to make 33 per cent upfront payment.

For spectrum below 1Ghz band such as 700 Mhz, 800 Mhz, 900 Mhz, companies will require to pay 25 per cent upfront and rest in 10 years after a 2-year moratorium. It is in line with practice of earlier auctions but differs from Trai suggestion.