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Spectrum bid revenue up 37% from last time; Govt denies tariff increase

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NEW DELHI: Even as the government has allocated spectrum worth more than Rs 1.09 lakh crore, Telecom minister Ravi Shankar Prasad has said this will not mean any rise in mobile tariffs.

Tariff impact after the auctions will not be more than 1.3 paise per minute for users,” he said. About the criticism over high spectrum prices, he said, “It is not correct to speculate that prices of mobile calls will increase. We have seen estimates and analyses.”

The spectrum won would be with telecom companies for 20 years. Hence, the total bids of about Rs 1.1 lakh crore, if spread over 20 years, would lead to a payout of only Rs 5,300 crore a year for operators. The annual revenues, he said, of mobile companies in India collectively are roughly Rs 2 lakh crore.

The successful bidders have to pay 33 per cent of the amount within 10 days of the result of the auction and the balance 67 per cent is to be paid by the TSPs over the next 12 years (of which there will be a moratorium of two years and and then ten equally).  

Meanwhile, the Supreme Court permitted the government yesterday to declare the results of the bidding and also to commence work of allocation.

However, the judges made it clear that this was subject to the final judgment in the bunch of petitions challenging the conditionalities in the notice inviting applications to join the e-auction process.

The spectrum auction in 2100 MHz, which caters to 3G, 1800 MHz, 900 MHz, and 800 MHz band, which commenced on 4 March and ended on 25 March after 115 rounds over 19 days, has fetched over Rs 109,874 crore. However, approximately 11 - 12 per cent spectrum remained unsold.

In all, 470.75 MHz has been put to auction in various local service areas. This compares with 390 MHz in November 2012 and 426 MHz in February 2014.

There was robust activity in the all the spectrum bands and vibrant bidding. Prices have significantly increased in 50 of the 69 offerings with bid price being as high as 300 per cent over reserve price in some instances. Overall increases over estimated proceeds from auction is about 37 per cent.

In November 2012, the total realization from auction of spectrum in 1800 MHz band was Rs 9407 crore and in February 2014 Rs 61,162 crore has been realized. 

Since the Supreme Court has given the leave to proceed further, the provisional results are being declared. Of the eight participants in the auction, seven have been awarded spectrum.

This is the first time that spectrum has been offered simultaneously in four bands. In previous auctions, different bands were auctioned sequentially. This auction design has enabled bidders to take informed decisions while placing bids and consider alternatives dynamically.

Another noteworthy feature is that for the first time there is robust demand for 800 MHz band, which in previous auctions had seen very sluggish response.

Some of the steps taken to enhance transparency as well as to remove barriers to participation included five MHz spectrum in 2100 MHz band released to increase availability of spectrum; in principle approval was received from Defence to release further 15 MHz in 2100 Mhz band to the telecoms sector; earnest money percentage was reduced to between 11-25 per cent, earlier in some instances it was over 40 per cent; taking into account suggestions and request from operators the ‘extension’ budget – that is the extra time allowance for bidding was increased from 240 minutes to 360 minutes.

Orders on applicable Spectrum Usage Charges (SUC) were issued before the auction, which reduced the regulatory risk of the bidders and the modalities for liberalization of 800 MHz spectrum was notified.

Transparent and clear rules for allocation of spectrum were notified for the first time. Earlier spectrum other than the contiguous spectrum was allotted randomly.

The Department also took steps towards putting in place a roadmap for availability of spectrum by notifying the Defence Band and Defence Interest zone.

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