Spectrum auction may not find many takers

High reserve price, adequate availability of spectrum and huge debt among the key reasons for the lack of interest

The biggest ever auction for airwaves is an opportunity for telcos to shore up their spectrum bank and prepare for the imminent data war that is likely to ensue with the launch of Reliance Jio’s services. 

However, the big 3 telcos will not bid for 700 Mhz band, putting at risk 74% of govt's estimated spectrum proceeds

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Over 2,000 Mhz of airwaves will be available across spectrum bands from 700Mhz to 2,500Mhz. The talking point, of course, is the reserve price of Rs 11,485 crore per Mhz for the 700Mhz band. This is much coveted spectrum, given that it costs 70% cent less to offer services on this band than, say, a 2100Mhz band. This alone will fetch the government about Rs 4 lakh crore. However, there may not be many takers. Among the top telcos, barring Vodafone and Idea which have many spectrum gaps in their portfolio, Airtel and RJio have sufficient spectrum across bands to offer 4G services.

Bharti Airtel has in recent investor interactions said it is well placed in terms of data spectrum, both in 3G and 4G LTE (long term evolution) spectrum in 22 markets

The other reason for lack of interest in the 700 Mhz spectrum is the huge debt, estimated at over Rs 3 lakh crore, telecom companies are sitting on. It may not be viable to add more debt to already leveraged positions. 

However companies have been indicating their unwillingness to bid before every auction and have continuously surprised the Street by bidding aggressively. Will this change this time? Most analysts believe that at over three times the average base price charged in the last three auctions, the current pricing could well be out of reach.

The industry has been asking for a uniform spectrum usage charge across bands

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RJio, Bharti Airtel will be key beneficiaries of weighted average spectrum usage charge rate but the industry body is unhappy.