Govt again fails to find takers for 1,800-MHz spectrum

Sistema, the lone bidder for the 800-MHz band, to pay Rs 5,623.5 crore for 11 circles

Despite a cut of 30 per cent in base price, telecom operators on Monday cold-shouldered the 1,800-MHz spectrum put on the block by the government for the Delhi, Mumbai, Karnataka and Rajasthan telecom circles. The response was the same as that in the previous auction, in November last year, when these circles had not been able to secure even one bidder because of the high reserve price.

The response to the 800-MHz (CDMA) spectrum was only a little better, with Sistema Shyam Teleservices, the lone bidder, applying for 3.75 MHz of spectrum in 11 telecom circles, after the base price for the band was reduced 50 per cent.

Monday was the last date to submit applications for the auction, which was to begin on March 11.

The government had put on offer 50 MHz of airwaves in the 1,800-MHz band for four circles, besides 76.25 MHz in the 800-MHz band across the country. However, with no telco in the fray for the 1,800-MHz and only one firm for 800-MHz, there would now be no need for an auction.

Sistema, which had lost its licence in 21 circles following a Supreme Court order, had not bid in the November auction. Now, even as it is winding down its services in other circles, the company would bid for the Delhi, Gujarat, Karnataka, Kerala, Kolkata, Maharashtra, Mumbai, Tamil Nadu, Uttar Pradesh (East), UP (West) and West Bengal circles.

The muted response to its auction plan is set to upset the government’s grand target of rustling up Rs 40,000 crore from sale of spectrum and one-time charges this financial year. In the previous auction, the government had been able to mop up only Rs 9,407 crore. However, under the auction terms, a company has to pay only a third of the amount in the first year and the rest in eight instalments. So, the government’s actual earnings, after adjustments made for operators’ cancelled licences, had got shrunken to a mere Rs 1,706 crore.

Since it is the only bidder, it is clear that Sistema would have to pay Rs 5,623.50 crore for 3.75 MHz of spectrum in 11 circles. Considering it has to pay only 33 per cent in the first year, its outgo for now would be Rs 1,855.75 crore if it goes for the deferred payment route. Also, there will be Rs 1,658-crore adjustment for its cancelled licence. That would bring down its net outgo to less than Rs 200 crore.

Had the government been able to attract bidders for the entire spectrum offered, it would have been able to earn revenues of Rs 20,209.17 crore. And, even if all the players winning spectrum went for deferred payment, the realisation this year would have been around Rs 6,669 crore.

“Sistema Shyam Teleservices is committed to its operations in India. It on Monday submitted its application to participate in the 800-MHz spectrum auctions. After auctions, with the operational footprint clearly defined, the plan is to focus on data-centric voice-enabled strategy in select circles and build an even stronger MTS brand in India,” the company said in a statement.