The Budget estimated the sale of spectrum to fetch Rs 14,355 crore to the exchequer — Rs 9,355 crore from 800, 900 and 1,800-MHz bands and Rs 5,000 crore from 2,100-MHz band — this financial year. The rest was projected to come from other levies like spectrum usage charges and licence fees.
Since companies pay in a deferred way, only a third of the total estimated bid amount was taken into account as the earning from spectrum sale. So, it implies the government expects the total bid amount to be only a little more than Rs 43,000 crore. That projection might be on the lower side, given the bids received in the previous round of auction, and the amount of airwaves being put on the block this time.
If the government has estimated Rs 5,000 crore in revenue from only the five MHz of 2,100-MHz spectrum (each circle) that is to be auctioned, the expected revenue will go up substantially, as the plan now is to auction a total of 20 MHz (15 + 5 MHz) in each circle, after the proposed swap of spectrum is finalised between the defence ministry and the department of telecommunications (DoT).
Besides, 29 licences in 18 telecom zones are coming for renewal in the 900-MHz band. Companies will also look to win 2,100-MHz spectrum for enhancing their 3G footprint and could acquire additional 1,800-MHz spectrum for long-term evolution (LTE) services.
The high bid amount was because the 900-MHz spectrum was auctioned for the high-value metro circles. This time, the auction will not be for circles like Delhi, Mumbai and Kolkata, where the reserve price is high.
There will be 184 MHz of 900-MHz spectrum available for auction, as 29 licences will be due for renewal in 18 telecom zones in 2015-16. Besides, there will be 136 MHz of 800-MHz spectrum, and as much as 330 MHz of 2,100-MHz airwaves on offer. Considering the reserve prices that the Telecom Regulatory Authority of India (Trai) has recommended, and as operators seem to accept these prices as reasonable, bidding is likely to be aggressive. This would lead to a higher market price for the airwaves.
For the 2,100-MHz band, Trai has suggested the base price at Rs 2,720 crore per MHz of pan-Indian spectrum (22 circles). This is about 22 per cent lower than the 2010 auction base price that generated as much as Rs 67,700 crore.
The regulator has suggested the base price for the 1,800-MHz spectrum (20 circles) at Rs 2,138 crore per MHz; for 900-MHz (18 circles, where existing licences will be due for renewal) at Rs 3,004 crore per MHz; and 800-MHz (pan-India) at Rs 3,104 crore per MHz.
In the past, the government usually set high targets for receipts from telecom and failed to achieve those in most years. In the year ended March 2012, the government received Rs 16,551 crore from other communication services, against a target of Rs 29,649 crore. The next year, it received Rs 18,902 crore, against a Budget target of Rs 58,217 crore. In the year ended March 2014, however, the government met its target of Rs 40,847 crore from telecom and received 61 per cent more than the Rs 11,343-crore Budget target from spectrum auction.
While incumbent operators need to renew licences, operators have been constantly looking to increase their spectrum holding in each circle, to boost their potentially remunerative high-speed data services. While Bharti Airtel, Vodafone India and Idea Cellular will try to retain spectrum in the circles where their licences are expiring in the 900-MHz band, they are likely to pick up spectrum in the 1,800-MHz band in all those circles.