Cabinet clears Rs 5.5 lakh crore mega spectrum auction plan


New Delhi : The stage is set for a mega spectrum sale with the Union Cabinet giving a go ahead to auctions across seven bands. The sale will see the government put over 2,000MHz of spectrum on sale the highest ever in a single auction which is likely to fetch the exchequer at least Rs 5.5 lakh crore if all the mobile airwaves are sold at the reserve price. 

Meanwhile a decision on spectrum usage charges which has evoked strong response from stakeholders has been deferred and the matter will be referred again to the Telecom Regulatory Authority (TRAI), which has been asked to submit a report within a week. The main document of auction, notice inviting application, is likely to be issued by July 1, followed by a pre-bid conference on July 6. Bidding is expected from September 1. The potential revenue is supposed to be more than double of the telecom services industry's gross revenue of Rs. 2.54 lakh for 2014-15.

"This will be the largest auction to date," finance minister Arun Jaitley told a news conference, that was also addressed by telecom minister Ravi Shankar Prasad. According to a cabinet note, the seven bands in which the airwaves are to be auctioned are 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz bands. The sale of 700MHz looks set to go ahead despite operators voicing concerns over the move, arguing it should be put off for two years until the 4G ecosystem in the country has developed more. As per the rules approved by an inter-ministerial panel, the auction would include sale of the most premium 700 Mhz band at a reserve price of Rs.11,485 crore per Mhz.

The cost of delivering mobile services in this band is estimated to be around 70% 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 worth over Rs.4 lakh crore. Leading operators have, however, sought deferring the sale of 700 MHz spectrum, saying that ecosystem for providing services in this band is not developed and would lead to under-utilisation of the spectrum for several years, blocking industry's funds.

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% upfront payment and the rest in ten years after a 2-year moratorium. In earlier auctions, companies were given option to make 33% upfront payment.