Spectrum Auction Begins Today, Target 5.6 Lac Cr

Show-stopper – 700 MHz band:

The premium 700 MHz band is the ‘show-stopper’ with all eyes fixed on it. It is being put on block for the first time. However, its sharp and steep pricing could be a dampener. Any company interested in buying spectrum in the 700 MHz band will have to shell out a minimum of Rs.57,425 cr for one block of 5 MHz on a pan-India basis. All together, a total of 2,354.55 MHz of mobile airwaves frequencies are up for auction for the 700 Mhz, 800 Mhz, 900 Mhz, 1800 Mhz, 2100 Mhz and 2300 Mhz bands. All the airwaves being auctioned can be utilized for high speed 4G services.

A total of 7 players:

Seven(7) operators are in the fray – Reliance Jio, Bharti Airtel, Idea Cellular,Vodafone, RCom, Tata Teleservices and Aircel. RCom and Aircel, which recently announced a merger, plan to bid separately in the upcoming mega-spectrum auction. These telecommunication operators have deposited Rs.14,653 cr as earnest money for the spectrum auction, with Reliance Jio submitting the highest amount of Rs.6,500 cr. EMD or Earnest Money Deposit is indicative of a firm’s strategy to bid inspectrum bands and specific circles. Telecommunication companies have to deposit close to 12 per cent of the reserve price of the spectrum which they are likely to bid for.

Expectations of Analysts and Care Ratings:

Going by the earnest money deposits (EMDs), market analysts don’t expect aggressive bidding from the operators. Care Ratings are expecting a muted response from the operators at the spectrum auction as they will look at alternatives such as sharing of airwaves. Many telecommunication operators are also reeling under high debts that may prevent them to bid aggressively.

However, Vodafone’s cash injection of close to Rs.47,000 cr into its Indian unit ahead of the spectrum auction and Reliance Jio’s entry have raised some positivity about the response to the auction.

As far as battling Jio is concerned, market analysts and industry players said that nationwide premium 4G services were a must. Both Vodafone (ranking 2nd in India) and Idea Cellular (ranking 3rd in the country) have 4G services in just about half of twenty-two telecom circles.

Expectations of Finance Minister Arun Jaitley:

Reliance Jio and Bharti Airtel have nationwide offerings. However, both are also expected to bid, largely to deal with volumes, raising prices and interest. The success of the spectrum auction is vital for bridging the government’s Budget deficit. Arun Jaitley, Finance Minister, expects a revenue of Rs.98,994.93 cr from communication services which encompasses proceeds from spectrum auction and other fees.

The telecommunication companies winning spectrum have to pay 25-50 per cent of the bid money upfront, depending on the kind of spectrum. The balance has to be paid in a decade after a 2-year moratorium.

A writer by day and a passionate reader by night. Writing just doesn't fill my pocket but it also fills my heart. Passion for writing about new events & happenings is what soothes my mind & soul.