A Cloud Over Bids
- Maximum activity expected in the 900 band where many companies’ spectrum will come up for renewal this year.
- Companies miffed because of high reserve price and low amount being offered in the new 2100 band. 800 band also likely to get few takers.
- Government may fetch around Rs 80,000-1,00,000 crore or a bit above reserve price only, as firms look to economise, though some have put in high earnest money.
- Telecom industry has a debt of Rs 2,50,000 cr. At reserve price, this auction will add another Rs 80,000 cr to its debt.
- Tata Teleservices, Aircel and Uninor likely to have limited exposure. Sistema Shyam, Videocon are not participating.
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Even as the government gears up for a bonanza from the upcoming spectrum auctions in March, there is complete confusion and resentment among telecom players regarding the price and terms of the auction. This may lead to subdued participation in select bands. Already, some players have withdrawn from the auctions while others have approached courts for redressal. Says a top official from a leading telecom company, “The action will only be in the 900 band as some of us need to get spectrum to keep our services running. But we will ensure that bidding remains tame.”
Telecom companies are up in arms on the ground that the reserve price set by the government for spectrum is extremely high as compared to previous auctions and also that in some bands, very little spectrum is being offered. This, say industry insiders, would reflect in reduced or scanty participation in the auctions. As of February 16, the last day of the application for participating in the auctions, eight companies had applied, many of them with permits coming up for renewal this year, and desperately needing spectrum to keep operating.
Governments look at spectrum auctions to garner revenues and improve fiscal deficit numbers. This time, the government is looking at upwards of Rs 80,000 crore from the auctions.
Industry sources say companies are seeing the auctions with limited interest. The 900 band, where most services are provided now, may see some aggressive activity from Idea, Vodafone, Reliance Communications and Bharti Airtel, some of whose permits are coming up for renewal and who would seek to protect their spectrum and investments at any cost. The auctions could prove to be crucial for Idea Cellular, as their permits in nine circles are coming up for renewal. It is seven for Reliance Communications and six for Bharti Airtel and Vodafone. Tata DoCoMo, Aircel, and Uninor are expected to remain in the sidelines.
Industry sources also inform that while the 1800 band may not see much bidding, the 800 band, which is for 4G and LTE, may also not see any much activity unless Reliance Jio, which put in the highest earnest money, decides to pick up more ,contiguous spectrum. The 2100 band will also see a low level of interest, as operators have consistently complained about its high reserve price.
Industry sources say companies are not likely to resort to overbidding. In case of aggressive bidding, they might even reduce their spectrum holding to keep net fund outflow under check. This is because the industry is already reeling under high debts. Rajan Mathews, DG, Cellular Operators Association of India, says, “The DoT is playing a game to ensure a certain amount to the national exchequer. But the industry is sitting on a debt of Rs 2,50,000 crore. Even if bidding happens at the reserve price, it will add another Rs 80,000 crore to their debts.”
Already, Sistema Shyam Teleservices and Videocon have decided to stay out. In a statement, Sistema said, “...the pricing of 800 Mhz spectrum at Rs 3,646 crore per MHz, is way out of line and does not merit a strong business case for buying additional spectrum. ...such pricing does not take into account the realities of the prevailing ecosystem.” Also, some firms like Bharti Airtel and Idea have approached courts against certain terms in the notice inviting applications (NIA), a move that may affect the auctions.
The other issue is of limited spectrum being offered. While the 2100 band, to be vacated by the defence sector, has been opened up, only 5 MHz is being offered. The majority 15 MHz will be available only after 10-12 months. What is also discouraging telcos is the fact that if prices go high now, they will have to pay at that rate for the remaining 15 MHz. Even in the 800, 900 and 1800 bands, the amount of spectrum offered is well below industry’s expectations. This is in contrast to Union telecommunications minister Ravi Shankar Prasad’s assertion that there is no shortage of spectrum. Clearly, the government will garner revenues but it will surely be much less than what it could have if the process was handled well.
