Vodafone, Airtel win spectrum; Govt gets Rs 61,162 cr
Vodafone Group and Bharti Airtel won critical wireless telecom spectrum in metros like Delhi and Mumbai and several other cities in an intensely fought 10- day auction that gave the government over Rs 61,162 crore, far exceeding its own target.
New Delhi: Vodafone Group and Bharti Airtel won critical wireless telecom spectrum in metros like Delhi and Mumbai and several other cities in an intensely fought 10- day auction that gave the government over Rs 61,162 crore, far exceeding its own target.
Mukesh Ambani's Reliance Jio Infocomm, which surprised by entering the fray despite owing pan-India 4G spectrum, bid aggressively for both the bands of airwaves on offer - the premium 900 Mega-Hertz and not so efficient 1,800 MHz, but choose spectrum only in the later band in 14 out of 22 circles.
Vodafone, whose license in Delhi, Mumbai and Kolkata is due to expire in November this year and desperately needed spectrum in the auction to continue operations, put in bids worth Rs 19,600 crore to win 900 MHz airwave in the three metros and 2G 1800 MHz spectrum in 11 circles or zones.
Airtel, whose licenses in Delhi and Kolkatta was due to expire in November, won back 900 MHz in both these metros and added the same in Mumbai. It also won 1,800 MHz spectrum in 15 circles. It put in total bid worth Rs 18,530 crore for a total of 115 MHz of spectrum in 900 MHz and 1800 MHz bands.
Sunil Bharti Mittal-promoted firm said it will roll out pan-India 4G network using 1800 MHz.
Idea was the only other company to win the 900 MHz spectrum, which is capable of 3G communications, in Delhi.
In all the auction, which lasted 10 days, fetched the government Rs 61,162 crore, of which Rs 18,296.36 crore will flow to the exchequer within this fiscal. The government was initially expecting only Rs 11,300 crore of revenues to come from the spectrum auction in the current year.
Uninor won spectrum in five circles in 1800 MHz band while Idea got 11 circles in the same band. Anil Ambani's Reliance Communications won just one circle of 1800 MHz in Mumbai. Tata Communications drew blank. Aircel got 5 circles.
"I am very happy to report that auction is over. The total revenue that will come to government is Rs 61,162.22 crore. To that extent particular auction has been extremely successful," Telecom Minister Kapil Sibal said.
On whether the strong bidding will impact mobile tariffs, Sibal said: "But this successful auction will really be successful if we are able to provide efficient service to consumers.
"Ultimate objective if any auction which has to provide service is that service must be provided efficiently and at a relatively affordable price. We hope the tariffs will remain reasonable in the years to come."
The government had put on the block about 385 MHz of radiowaves in the 1800 MHz band, and 46 MHz in the 900 MHz band. At the base price, that cumulatively amounted to about Rs 47,933 crore.
Telecom Secretary MF Farooqui said that bids worth Rs 37,572.60 crore have come in for radiowaves in 900 MHz band, and Rs 23,589.62 crore for 1800 MHz band.
Companies have the option to pay 33 per cent upfront for 1800 Mhz band, and 25 per cent in case of 900 Mhz band.
"Government will get at least Rs 18,296.36 crore from upfront payment this fiscal," Farooqui said.
The government conducted the third round of auction following a Supreme Court order in the 2G spectrum allocation case directing that all radiowaves freed from the cancellation of 122 licences in February 2012 should be auctioned. About 78 MHz remained unsold in 1800 MHz.
The 900 MHz had to be auctioned as some of the radiowaves in this band are held under old telecom licences, which will start expiring from November 2014.
The biggest winner in the spectrum auction, Vodafone said that it is the only operator in India now to have capabilities on all the commercial spectrum bands - 3G on 900 MHz and 2100 MHz and 4G on 1800 MHz.
"We are pleased to have secured our business for the next 20 years in three of our most important circles. We have also opened the door to the next generation of mobile technology - 4G - by acquiring 1800 spectrum in the places where we expect this market to take off first," Vodafone India's Managing Director & CEO Marten Pieters said.
Bharti Airtel said the auction has lent credence to the industry's position that reasonable reserve prices ensure successful auctions, while high reserve prices are counter- productive.
"Future auctions should ensure that more spectrum in the 900 MHz band is secured from other agencies and the operators who are grossly under-utilising this important spectrum band," Bharti Airtel's Joint MD and CEO for India, Gopal Vittal said.
He also raised issue of spectrum in the CDMA band for which auction is due.
"The auction also highlights the urgent need for vacating E-GSM spectrum in the 800 MHz band, which is being used for older technologies or is lying unused with certain agencies," Vittal said.
Uninor acquired additional spectrum in the 1800 MHz band in four of its six existing circles for Rs 844.7 crore.
"It is critical that mobile tariffs remain affordable for the mass market after the auctions," Uninor's nominated CEO Morten Karlsen Sorby said.
Meanwhile, telecom analysts said that the high spectrum price may not lead to increase in call rates and other mobile services.
"The overall outcome of the higher input cost should have been increase in tariff. However, due to intense competition, all the increase in cost is unlikely to get passed on to the consumer," Partner at Deloitte Haskins & Sells Hemant Joshi said.
Out of the five online spectrum auctions, the just-ended round was the largest in terms of radiowaves on sale, and third longest till date in terms of duration.
3G auction in 2010 lasted for 34 days, broadband wireless access (BWA) ended in 16 days. 2G auction in November 2012, on the other hand, ended in just two days, while the CDMA auction in March 2013 ended same day.
The total bid value of the spectrum in the two bands (Rs 61,162 crore), crossed over 90 per cent of the money that the government had received in the 3G spectrum auction in 2010, which fetched Rs 67,718.95 crore, although the quantum of radiowaves put up for sale in the latest round was higher.
Director General of GSM industry body COAI, Rajan S Mathews expressed disappointment on high spectrum price and said: "We feel that the government has emerged as the real winner. While the industry is relieved at the conclusion of the auctions, there also lies disappointment at the winning price points."
It has to be seen if the operators will have financial resources to invest in networks and marketing after bearing the high spectrum costs, he added.
"In order to help the industry overcome this huge financial burden, the government should address the high tax/ levy structure on the industry. We would urge the government to reduce the SUC (spectrum usage charge) and the USOF (Universal Service Obligation Fund) levy to 1 per cent to provide some relief to the telcos," Mathews said.