 "Telecom firms signal muted response to spectrum sale")
The earnest money deposit (EMD) by telcos indicates a muted response to the spectrum auction as at this rate airwaves worth about Rs 1.40 lakh crore could be bid for, compared with airwaves worth Rs 5.66 lakh crore put up for auction by the government.
In the previous auction in March 2015, eight telcos had deposited Rs 20,435 crore as earnest money and the government had earned highest proceeds of Rs 1.10 lakh crore.
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Industry sources predict that spectrum worth about Rs 80,000 crore would be sold in the upcoming round. If that happens, the government will meet its revenue target of Rs 64,000 crore from spectrum auction in the current financial year as announced by Finance Minister Arun Jaitley in the budget.
Overall, the government expects to earn Rs 98,995 crore from communication services in 2016-17, which includes proceeds from spectrum auction as well as other fees levied by the Department of Telecommunications (DoT).
According to a Credit Suisse report, the top three operators and Jio may spend at least Rs 35,500 crore at reserve prices, primarily in the 2,100-MHz and 1,800-MHz band (nil in the 700-MHz band).
The report said there could be upside to this number if bidding goes above the reserve price, or if operators buy additional carriers.
| THE GREAT INDIAN SPECTRUM SALE |
| RELIANCE JIO EARNEST MONEY DEPOSIT: Rs 6,500 cr POTENTIAL BIDDING STRATEGY: Could bid for 5 MHz in 700-MHz band. Likely to concentrate on 800-MHz and 1,800-MHz band VODAFONE EARNEST MONEY DEPOSIT: Rs 2,750 cr POTENTIAL BIDDING STRATEGY: May bid for 1,800-MHz, 2,100-MHz, 2,300-MHz and 2,500-MHz band to improve 4G footprint IDEA CELLULAR EARNEST MONEY DEPOSIT: Rs 2,100 cr POTENTIAL BIDDING STRATEGY: Could go for 1,800-MHz, 2,100-MHz, 2,300-MHz and 2,500-MHz band BHARTI AIRTEL |
POTENTIAL BIDDING STRATEGY: Will try to fill gaps in circles where it does not have 4G airwaves. May bid for 1,800-MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz
TATA TELESERVICES
EARNEST MONEY DEPOSIT: Rs 1,100 cr
POTENTIAL BIDDING STRATEGY: Could bid for 800-MHz band in Delhi, Mumbai and Maharashtra circles
RELIANCE COMMUNICATIONS
EARNEST MONEY DEPOSIT: Rs 313 cr
POTENTIAL BIDDING STRATEGY: Could bid for 800-MHz band in select circles
AIRCEL
EARNEST MONEY DEPOSIT: Rs 120 cr
POTENTIAL BIDDING STRATEGY: May bid selectively
The government has put up 2,354.55 MHz spectrum for auction at reserve price of Rs 5.66 lakh crore. However, no telecom operator, apart from Reliance Jio, has deposited earnest money worth 5 MHz of 700-MHz band for which the government has set a reserve price of Rs 11,485 crore per MHz.
Senior officials said while EMD indicates the width of what telcos can bid for, it has little correlation to the outcome of the auction where competition drives prices. To that extent, EMD is only a parameter to gauge participants' interest in an auction.
According to sources, Mukesh Ambani-led Jio has submitted EMD of Rs 6,500 crore, the highest among the seven operators. Jio's EMD was followed by Vodafone's Rs 2,750 crore, Idea Cellular's Rs 2,100 crore, Bharti Airtel's Rs 1,980 crore, Tata Teleservices' Rs 1,100 crore, RCom's Rs 313 crore and Aircel's Rs 120 crore, said sources close to developments.
According to industry, the main reason for poor response to spectrum auction is high reserve price for the 700-MHz band, which alone accounts for reserve price of Rs 4 lakh crore. With no ecosystem for 700-MHz in place, operators are not likely to bid for it and would concentrate on 1,800-MHz, 2,100-MHz, 2,300-MHz and 2,500-MHz.
Also, there is immense competition in the market, especially with the entry of Jio, so operators are likely to bid selectively and try to fill in the gaps in their networks. The appetite to buy airwaves is not very encouraging as the telcos have been under huge debt and the outlook of the sector is not very positive.
People in the industry believe that Vodafone and Idea are likely to bid aggressively as they need to augment their 4G capacity whereas Airtel, which is in a more comfortable position when it comes to spectrum holding, is likely to bid in select circles to fill in the gaps.
However, it remains to be seen if Jio will go for 700-MHz. The latest spectrum auction is important as the government is putting up large chunks of spectrum for sale for the first time, which should help remove fragmentation and improve quality of services. The auction rules have also been made bidder-friendly.