Cabinet approves mega spectrum auction plan

Zee Media Bureau

New Delhi: The Union Cabinet on Wednesday approved the mega-spectrum auction plan in which airwaves worth Rs 5.66 lakh crore will be put for sale.

Government expects to raise at least Rs 64,000 crore from the auction of about 2300 Mhz of spectrum and Rs 98,995 crore from various levies and services in the telecom sector.

The main document of auction, notice inviting application, is likely to be issued by July 1, followed by pre-bid conference on July 6 and bidding from September 1.

As per rules approved by inter-ministerial panel, the auction would include sale of most premium 700 Mhz band at a price of Rs 11,485 crore per Mhz. The cost of delivering mobile services in this band is estimated to be around 70 per cent lower than 2100 Mhz band, used for providing 3G services.

A company interested in buying spectrum in 700 Mhz band will need to shell out a minimum of Rs 57,425 crore for a block of 5 Mhz on pan-India basis. This band alone has the potential to fetch bids of over Rs 4 lakh crore.

The total potential revenue of Rs 5.66 lakh crore from the spectrum sale is more than double of telecom services industry gross revenue of Rs 2.54 lakh crore reported in 2014-15 financial year.

Leading operators have requested to defer sale of 700 MHz spectrum, saying that ecosystem for providing services in this band was not developed and sale would lead to underutilisation of the spectrum for several years and block industry's fund.

As per global industry body GSMA, the total recommended reserve price for the auction is almost double the cost of all spectrum investment to date in India and more than 20 times the annual free cash flow of the entire mobile industry.

The panel has also suggested stringent payment conditions compared to liberal method suggested by Telecom Regulatory Authority of India (Trai).

The panel has favoured that companies winning spectrum in higher frequency bands -- above 1 Ghz like 1800 Mhz, 2100 Mhz, 2300 Mhz -- should make 50 per cent upfront payment and the rest in ten years after a 2-year moratorium. In earlier auctions, companies were given option to make 33 per cent upfront payment.

For spectrum below 1 Ghz band such as 700 Mhz, 800 Mhz, 900 Mhz, companies will require to pay 25 per cent upfront and rest in ten years after a 2-year moratorium. It is in line with practice of earlier auctions but differs from Trai suggestion.