The union cabinet has approved auctioning of 4G telecom spectrum in 7 frequency bands between 700 megahertz and 2,500 megahertz. Auctions are scheduled for March 2021 and will have a validity of 20 years. Government expects to rake in Rs 3.9 lakh crore at the reserve price.
“The notice inviting applications from telecom service providers will be issued later this month, and the government hopes to complete the sale by March 2021”, said Telecom Minister Ravi Shankar Prasad.
“These auctions are only for 4G services, as the Department of Telecommunications (DoT) is yet to finalise the spectrum bands for auction of 5G spectrum”, he added.
Successful bidders might have to pay entire bid amount in one go or pay 25 percent to 50 percent upfront and remaining amount in 16 equated annual instalments, after a moratorium of two years. Successful bidders will have to pay 3 percent of the adjusted gross revenue (AGR) excluding wireline services as spectrum usage charges.
The new round of auctions is likely to provide a boost to government revenue collections at a time when its inflows from other sources such as direct taxes, indirect taxes such as goods and services tax, have fallen sharply on account of restrictions to prevent the spread of Covid-19.
Incidentally, the reserve price of spectrum being auctioned in this round — in the 700, 800, 900, 1,800, 2,100, 2,300, and 2,500 MHz bands — are lower than the Telecom Regulatory Authority of India’s (TRAI’s) recommendations, which were accepted by the Digital Communications Commission (DCC), the highest executive decision-making body of the DoT.
On December 20, 2019, the DCC had approved the sale of 8,300 MHz spectra across 22 licensed spectrum access (LSA) or telecom circles. It had then decided to accept all the recommendations made by TRAI, including keeping the reserve price at Rs 5.22 lakh crore.
The reduced price of spectrum is in line with the demands made by the three major private telecom service providers, who had expressed reservations on the Rs 5.22 lakh crore reserve price accepted by the DCC. Of the three, Bharti Airtel and Vodafone Idea (Vi) had said they would not be able to bid for spectrum in the new auctions due to high reserve prices.
Both the providers are under pressure following the Supreme Court’s October 2019 ruling on adjusted gross revenue (AGR). The court had ruled that Bharti Airtel and Vi must pay long-pending AGR dues, the penalty for non-payment over the past years, and the interest on penalty for non-payment. Bharti Airtel owes DoT more than Rs 43,000 crore, of which it has paid close to Rs 18,000 crore until now, while Vi owes more than Rs 58,000 crore, of which it has paid nearly Rs 6,900 crore.
Along with the price, the total spectrum on offer has also been reduced by more than a third. The DoT, however, has pinned its hopes on making good money from the auction. In January this year, DoT secretary Anshu Prakash had said that he hoped that the TSPs would bid for spectrum in the 4G band as “telecom operators do require spectrum”.
“I think we should be able to sell it. Their services are expanding, their networks are expanding. There should be good competition in bidding for this. I will wait and watch,” he had said.
