Cabinet Approves Mega Spectrum Auction

Cabinet Approves Mega Spectrum Auction
Highlights
  • Government expects to raise at least Rs. 64,000 crores from the auction.
  • The bidding is expected from September 1, plans are yet to be confirmed.
  • The auction would include sale of most premium 700MHz band.
The Union Cabinet Wednesday approved the mega-spectrum auction plan which is estimated to fetch about Rs. 5.66 lakh crores to the exchequer.

"Yes, spectrum auction proposal has been cleared," an official source said.

Government expects to raise at least Rs. 64,000 crores from the auction of about 2300MHz of spectrum and Rs. 98,995 crores from various levies and services in the telecom sector.

According to sources, the main document of auction, notice inviting application, is likely to be issued by July 1, followed by pre-bid conference on July 6. The bidding is expected from September 1. The plans are yet to be confirmed officially.

As per the rules approved by an inter-ministerial panel, the auction would include sale of most premium 700MHz band at a reserve price of Rs. 11,485 crores per MHz. The cost of delivering mobile services in this band is estimated to be around 70 percent lower than 2100MHz band, used for providing 3G services.

A company interested in buying spectrum in 700MHz band will need to shell out a minimum of Rs. 57,425 crores for a block of 5MHz on pan-India basis. This band alone has the potential to fetch bids worth over Rs. 4 lakh crores.

The total potential revenue of Rs. 5.66 lakh crores from the spectrum sale is more than double of telecom services industry gross revenue of Rs. 2.54 lakh crores reported in 2014-15.

Leading operators have sought deferring the sale of 700MHz spectrum, saying that ecosystem for providing services in this band is not developed and would lead to underutilisation of the spectrum for several years, blocking industry's funds.

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

The panel has favoured that companies winning spectrum in higher frequency bands - above 1GHz like 1800MHz, 2100MHz, 2300MHz - should make 50 percent upfront payment and the rest in ten years after a 2-year moratorium. In earlier auctions, companies were given option to make 33 percent upfront payment.

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

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Further reading: India, Spectrum, Spectrum Auction, Telecom, Trai
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