Cabinet Approves Largest-Yet Spectrum Auction Set to Fetch Rs. 64,840 Crores

The government will sell 380.75 megahertz of second generation (2G) spectrum in three bands - the premium 900MHz, 1800MHz and 800MHz. Spectrum in 2100MHz may also be put on auction simultaneously after the Defence Ministry vacates it.

The Cabinet, headed by Prime Minister Narendra Modi, approved a reserve price of "Rs. 3646 crores pan-India per megahertz in 800MHz, Rs. 3980 crores for 900MHz band pan India excluding Delhi, Mumbai, Kolkata, and J&K; Rs. 2191 crores pan India (excluding Maharashtra and West Bengal) in 1800MHz band," an official statement said on Monday.

The reserve price for the 2100MHz band was not announced.

Government had garnered about Rs. 62,162 crores from the last auction in February 2014.

Proceeds from this year's auction will help government reach its fiscal deficit target of 4.1 percent of GDP.

As per the tentative timelines drawn by the Department of Telecommunications (DoT), last date for submission of application is February 2 and bidders will be pre-qualified by February 13. The auction will start on February 23.

Telecom Minister Ravi Shankar Prasad said the government intends to auction third generation or 3G spectrum in 2100MHz simultaneously.

"What had been pending for last many years, that is 5MHz in 2100MHz from Defence, we have been able to do it," he told PTI.

The focus of the February auction, he said, "is to provide adequate spectrum, prevent hoarding, fair competition, improve telecom services for consumers and adequate revenue for government."

The reserve or auction start price approved today is the same as the one recommended by the Telecom Commission, except in the case of 900MHz. The Telecom Commission had proposed a reserve price of Rs. 3,695 crores for eachMHz in 900MHz.

Against this, Cabinet approved reserve price of Rs. 3980 crores.

"The estimated revenues from this auction are Rs. 64,840 crores (excluding 2100MHz spectrum) of which Rs. 16,000 crores is expected to be realized in the current financial year," the statement said.

At the reserve price of last auction, airwaves were valued at about Rs. 48,685 crores.

Government had put on the block about 385MHz of radiowaves in 1800MHz band, and 46MHz in 900MHz band. During that auction, all the spectrum in 900MHz band got sold but 78MHz in 1800MHz band remained unsold.

Any company holding a universal service license to provide telephony services or eligible to obtain the same, can bid in this year's auction.

Successful bidders have to pay within 10 days 33 percent of the final sale price in case of 1800MHz. The same is 25 percent in case of 900MHz and 800MHz, the statement said.

"There shall be a moratorium of two years for payment of balance amount of one time charges for the spectrum, which shall be recovered in 10 equal annual installments," it said.

In 800MHz band, 103.75MHz in all service areas is being put on auction while 177.8MHz in 900MHz band is being sold in 17 telecom circles or service areas. 99.2MHz will be auctioned in 15 circles in 1800MHz band, it said.

There are total 22 telecom service areas in the country and the price of spectrum in each circle is different.

Telecom Commission has recommended auctioning 184MHz in 900MHz band across 18 service areas and 100.2MHz in 1800MHz band in 15 service areas. The quantum of spectrum for auction in 1800MHz has been reduced by Cabinet.

The 900MHz and 1800MHz band are used for providing GSM-based mobile services by companies like Airtel, Vodafone, Idea, Uninor. The 800MHz band is used for CDMA based mobile services by companies like MTS, Tata Teleservices and Reliance Communications.

The base price of Rs. 3,980 crores for each megahertz of spectrum in premium 900MHz band for the upcoming auction, is over 10 times higher than what telecom operators paid earlier.

The spectrum in 900MHz held by Airtel, Vodafone, Idea and RCom through their licences is expiring in 2015-16. These are being put up for auction.

The base price of Rs. 3,646 crores per megahertz for 800MHz (CDMA) band - nearly 17 percent higher than the price suggested by Trai. It is also more than base price fixed by government for November 2012 auction.

There were no buyers of CDMA spectrum in November 2012 auction as companies felt spectrum price was too high to make a business case.

MTNL has proposed to surrender its CDMA spectrum in Delhi and Mumbai. BSNL has proposed to surrender one block of 1.25MHz CDMA spectrum in 10 service areas. As per DoT, after taking into account CDMA spectrum of MTNL and BSNL, only 103.75MHz can be placed for auction in February.