Spectrum auctions conclude with bids of Rs. 65,789 crore
The largest spectrum auction, in terms of the quantum and value of spectrum put to auction, concluded with around 60% spectrum remaining unsold. In value terms, the Government (GoI) garnered only 12% of the spectrum value – Rs. 65,789 crore as against Rs. 5,67,328 crore worth of spectrum put to auction. As per the payment plan offered to the telecom companies (telcos), the GoI would receive approximately Rs. 32,000 crore upfront, which is lesser than its estimated budget target.
Mr. Harsh Jagnani, VP – Corporate Ratings, ICRA Limited elaborates “The spectrum auction results are in line with ICRA’s earlier estimates of Rs. 60,000 – 65,000 crore, with no interest in the 700 MHz band. As against the Rs. 5.67 lakh crore valuation of spectrum at reserve price, only Rs. 65,789 crore was sold. All the telcos who participated have acquired spectrum, with action focused in the supra 1 GHz bands, because of relatively cheaper valuation. Spectrum acquisition for bolstering the data capabilities has been the theme of these auctions. However, despite the modest participation, post the auctions, the debt levels of the industry would remain elevated at an estimated level of Rs. 4,25,000 crore. We estimate the industry debt/OPBDITA to remain weak.”
The Department of Telecommunications (DoT) had planned the largest spectrum in the history of Indian telecom industry, by putting 2354.55 MHz spectrum on auctions with a value of Rs. 5.67 lakh crore. The spectrum put to auction was spread across seven bands viz. 800 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2300 MHz apart from two new bands viz. 700 MHz and 2500 MHz. Out of the total value of spectrum of Rs. 5.67 lakh crore, more than 70% was from 700 MHz band. Although 700 MHz band has higher efficiency for data services, it was expensively priced and the ecosystem around the band is not fully developed, which resulted in no participation in this band. The auction participation was also muted because, compared to the past auctions, the telcos did not face any spectrum expiry risks this time and focussed largely on filling gaps in their spectrum holdings, primarily for data services. The fact that auctions are a regular industry feature gives the telcos the flexibility to wait for the next round. Given the industry feedback in form of non-participation in the 700 MHz band and the quantum of spectrum remaining unsold, fresh auction with reduced price for 700 MHz cannot be ruled out.
Another factor constraining the participation in the auction is the limited financial flexibility of the industry, impacted by elevated debt levels. According to ICRA’s estimates, the consolidated debt level of the industry as on March 31, 2016 stood at around Rs. 4,10,000 crore as against around Rs. 2,90,000 crore as in March 2014. The forthcoming auctions would further push up the debt levels to Rs. 4,25,000 crore, after considering the equity infusion of Rs. 47,700 crore in Vodafone India which was largely used to retire outstanding debt.
