Revenue profits from spectrum auctions to tumble brief unless 700 mhz rope cost lowered

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New Delhi: The largest ever spectrum auction lined adult by a supervision for Sep could spin out to be a beating unless prices of a 700 mhz rope are revised downward. The supervision is putting on sale spectrum in bands of 700 mhz, 800 mhz, 900 mhz 1800 mhz, 2100 mhz, 2300 mhz and 2500 mhz and a sum of roughly 2000 mhz of spectrum should be put adult for auctions.

It is good pierce strategically given a attention can fill spectrum gaps by this auction and a supervision can enlarge a non-tax income receipts. But a pricing of 700 mhz band, on that hinges a altogether income collection by auctions, is a problem. The 700 MHz rope is a many costly and many effective though is expected to beget reduction seductiveness from telecom use providers during a stream building price.



The supervision has been eyeing Rs 98,994.93 crore from communication services this mercantile as per Budget proposals, and this volume includes deduction from spectrum auction and other fees levied by a Department of Telecom (DoT). It also includes balance from auction deduction in prior years.

The estimated profits from communication services are about double of a revised estimates for 2015-16 during Rs 56,034.35 crore. But will these desirous targets be realised during stream pricing? The supervision had fetched about Rs 1.10 lakh crore from a spectrum auction hold in Mar 2015.

A news from HSBC Global Research showed that tangible income era from a arriving auctions would be a fragment of what a supervision has targeted. “Our initial research suggests that sum deduction from spectrum auction are puzzled to surpass $10-12 billion (about Rs 80,000 crore) and we trust a lot of spectrum competence sojourn unsold in 700, 2300, 2500 MHz bands. We see good direct for 1800 MHz, resourceful direct for 2100 and 700 Mhz bands,” a news said. If this is correct, tangible deduction would be a fragment of a income profits a supervision has targeted by these auctions.

But COAI boss Rajan Mathews told CNBC-TV18 in an talk that there will be some direct for 700 mhz in some circles. “There will be some direct for some circles given in some of a circles, a pricing is not too bad given as we recall, it has triggered off from 1,800 pricing. So in some of a smaller circles, a pricing is not too out of line and there maybe some seductiveness in those circles though opposite a board, A circles, metros, Pan India, we don’t consider there is an ardour during this indicate during these prices.”

This year, auction of a super reward 700 mhz rope would be function for a really initial time, this rope is many suitable for fourth era telecom services (4G). The supervision expects a sale of airwaves alone to fetch a sum of Rs 5.66 lakh crore. Bids for a 700 mhz spectrum would go a prolonged approach in reaching this aim At a stream haven cost of Rs 11,485 crore per mhz for a 700 mhz band, a attention would have to bombard out Rs 57,425 crore for 5 mhz spectrum on a pan-India basis.

Trai had endorsed a pan-India haven cost of Rs 11,485 crore for 700 MHz, Rs 5,819 crore for 800 MHz, Rs 3,341 crore for 900 MHz, Rs 2,873 crore for 1800 MHz, Rs 3,746 crore for 2100 MHz, and Rs 817 crore any for 2300 MHz and 2500 MHz bands.

A telecom attention consultant pronounced that a 700 mhz rope is puzzled to see many behest and it is probable that a haven cost is revised downwards. This consultant forked out that Reliance Industries, that is in a best position to bid for this costly band, might select not to do so given it already owns a sizeable volume of a equally fit 800 mhz rope of spectrum. And other players like Bharti, Vodafone and Idea might not be means to means this spectrum rope due to pricing issues. The attention is struggling underneath a debt raise of good over Rs 3 lakh crore and shopping costly 700 mhz rope will many positively boost a debt weight on a industry.

According to calculations by a Economic Times, a income intensity of a arriving airwaves sale is some-more than double of telecom services attention sum income of Rs 2.54 lakh crore in FY 2014-15. The Telecom row has suggested 50% upfront remuneration and a rest in 10 years after a 2-year duration for spectrum in 1800 Mhz, 2100 Mhz, 2300 Mhz bands. For airwaves in 700 Mhz, 800 Mhz, 900 Mhz bands, telcos will need to compensate 25% upfront and rest in 10 years after a 2-year moratorium.

In a talk quoted earlier, Mathews of COAI pronounced 1800 mhz spectrum will continue to be of element seductiveness to a attention in a arriving auctions. “That is a one that is many ardently used for even 4G, long-term expansion (LTE) forms of application. So that is going to be there. The subsequent will clearly be a 2,100-2,300. 700 as we pronounced is rarely fascinating though again given of a pricing, we don’t see a whole lot of tangible behest for it. So we see a 1,800-2,100-2,300, so it is not surprising to contend demeanour during those haven prices, we can design those spectrum bands to be predominantly bid for.”

The attention consultant quoted progressing pronounced it is puzzled if many of 700 mhz and whole 2100 mhz can be sold. Former due to pricing issues and latter given it is fit for 3G services when a attention is focusing on LTE. This is a reason for some-more success in 1800 mhz, 2300, mhz and 2500 mhz bands.