NEW DELHI: The Centre expects to net a minimum Rs 5.56 lakh crore from India’s largest auction of 2G, 3G and 4G airwaves that starts September 29, but the lack of a compelling reason like expiry of bandwidth and the expensive starting price of 700 MHz spectrum could hurt demand, leaving the government short of its target.



The telecom department (DoT) on Monday released the Notice Inviting Application (NIA), or the legally binding document for the auctions, which will likely see Vodafone India and Idea Cellular bidding more aggressively to close the 4G spectrum holding gap with No.1 telco Bharti Airtel and Mukesh Ambani-owned Reliance Jio Infocomm.



The last two will mostly bid to plug coverage gaps, say analysts. Rajan Mathews, director-general of Cellular Operators Association of India (COAI), expects telcos to buy airwaves worth close to Rs 2.5 lakh crore in these auctions.





“There will be a reasonable response to 1800 MHz, 2100 MHz and 2300 MHz, with telcos picking up bandwidth to fill gaps in their existing coverage,” he said.“In the 700 MHz frequency, we think telcos will pick up bandwidth only in the 2-3 circles where it is priced equally to 900 MHz,” COAI’s Mathews said.The 800 MHz band will see “limited demand” because of the current holding pattern of bandwidth in this frequency, with most being held by Reliance Jio Infocomm and Reliance Communications.Idea Cellular Managing Director Himanshu Kapania said the industry was moving from a scenario of spectrum scarcity to one of spectrum glut, which means telcos will buy airwaves only when they need it.The NIA outlined all details, including the eligibility requirements. The pre-bid conference for the sale will be held on August 13; the last date for applications is September 13, and the deadline for withdrawing applications is September 22.The government’s objectives for the auctions include obtaining a market-determined price for the scarce natural resource, ensure efficient use of airwaves and avoid hoarding, stimulate competition in the sector and “maximise revenue proceeds”, the document listed.To increase demand for the sale, DoT has suspended any sort of consolidation in the market - spectrum trading/sharing/merger and acquisition - until the sale is completed.The government will sell 2354.55 megahertz of spectrum in the 3G bands of 900 MHz and 2100 MHz, and 4G bands of 700 MHz, 800 MHz, 1800 MHz, 2300 MHz and 2500 MHz. This is the largest quantity of spectrum put up for sale, which may generate over five times the amount Centre raised from last year’s auction, but only if all airwaves are sold at base price.The government, which will net only a part of the total proceeds from the sale in this fiscal year, needs the funds to meet its Budget deficit target of 3.5 per cent of GDP for FY17.Winners in the 700 MHz, 900 MHz and 800 MHz bands will need to pay 25 per cent of the bid amount within 10 days of close of auction. For the 1800 MHz, 2300 MHz and 2500 MHz bands, winners will have to deposit 50 per cent of the bid price as upfront payment.The rest would have to be paid in 10 equal instalments after a two-year moratorium. For the first time, the government will put on sale bandwidth in the 700 MHz frequency, which will be offered in blocks of 5 MHz across all the 22 circles.A total of 770 MHz of this bandwidth is being put up for sale at a starting price of Rs 11,485 crore per unit for pan-India airwaves - a rate deemed too expensive by the industry.Idea’s Kapania said the carrier was transforming from a voice operator to a voice and data network and that it intended to “get assets as we aim to enter the new market”.He, however, noted that the auction dynamics have changed from the last sale when operators were bidding because of renewals or sometimes because of scarcity as they didn’t know when airwaves will be available again.Analysts agreed that operators were under no compulsion to bid irrationally and were more conservative about the government’s estimated take-home. “The operators will choose spectrum based on availability, pricing and the band which will fit to their current spectrum holdings,” said consulting firm Deloitte.



Prashant Singhal, global telecommunications leader at EY India, expects the government to raise Rs 60,000-70,000 crore from the upcoming sale.



Industry upbeat

The industry was upbeat about the quantum of bandwidth being put on sale, the fact that most airwaves will be contiguous, or continuous (which is a must for offering 4G services), and that airwaves will be allotted within 30 days of the first payment, besides the simplification of rollout obligations.



Telecom Secretary JS Deepak said the department had taken several steps in line with the government’s initiative to ensure ‘ease of doing business’. Among the measures is speedy allotment of airwaves, reduction in the promoter’s lock-in period from three years to one year and simplifying the rollout obligations.



Under the new rules, an operator will be deemed to have met rollout obligations for all bands of airwaves purchased so long as the company has covered the district or block headquarters for any one technology in any band.



Spectrum sold in the upcoming auctions will attract a spectrum usage charge (SUC) of 3 per cent. However, the overall SUC that a telco pays will differ for various operators and will be a blend of multiple levies imposed on sale of bandwidth from time to time.



Computed as a weighted average, the overall SUC of each operator will now also include airwaves in the 2300 MHz, which earlier attracted a flat charge of 1 per cent.