Spectrum Auction May Increase Call Charges

"This will be a very big and interesting auction. Operators whose licences are expiring will be bidding hard to secure their position. Though Bharti Airtel, Vodafone and Idea Cellular managed to secure some airwaves in the 1800MHz (megahertz) and in last year's auction in some of the circles where their licences are expiring, they might have to bid hard to secure their position in circles where they don't have sufficient spectrum in 1800MHz band," Rishi Tejpal, principal research analyst, Gartner, told IANS.

The total spectrum put to auction is 103.75MHz in 800MHz band, 177.8MHz in 900MHz band and 99.2MHz in 1800MHz band - a total of 380.75MHz in 800, 900 and 1800MHz. The government will also put on sale 5 MHz in the 2100MHz band, which is used for 3G services in 17 out of 22 telecom areas.

The reserve price approved is Rs. 3,646 crore pan-India per MHZ in 800MHz, Rs. 3,980 crores for 900MHz band pan-India ; and Rs. 2,191 crores pan-India in 1800MHz band.

The government also approved a reserve price of Rs. 3,705 crores per megahertz for third generation services.

According to reports, the government expects to mop up Rs.75,000-Rs.1,00,000 crore from the auction which was mandated after the so-called 2G scam following the previous UPA government's junking the auction system for a first-come-first-serve basis spectrum distribution that led to charges of large-scale corruption and eventual fall of the government of Prime Minister Manmohan Singh.

"Industry is happy that they can expect more spectrum after the auction. At the same time, they are deeply unhappy about the limited amount of spectrum availability and the steep reserve prices. The auction is starting at a high base or reserve price; the final price could be much higher. Telecom operators will have to shell out a very large burdensome amount," Mahesh Uppal, director of telecom consultancy firm Com First, told IANS.

However, Jaideep Ghosh, partner, KPMG Advisory Services, thought the impact will not be so bad. "I think spectrum renewal plans are factored in the business plans of the operators and the payment has to be made over a period of 10 years. So I do not think for operators it is a very humongous amount," Ghosh told IANS.

In December 2015, seven licences each of Idea Cellular and Reliance Communications, four licences of Bharti Airtel and six licences of Vodafone will complete their 20-year term after which they have to be renewed.

"For players like Reliance Communications it is very crucial as some of their important service area licences are expiring at the end of this year," Tejpal said.

"If Reliance Jio also participates in the bidding then, it might target 1800MHz and 800MHz bands, which it can leverage for 4G LTE (long term evolution) technology," he added.

Tejpal cautioned: "Eventually the impact of this bidding will come down on the end users. This might lead to increase in voice and data tariffs. This auction is a crucial one and the telecom operators have to strike a balance so that the customers are not badly impacted."