Analysts feel not all spectrum will be sold in auction

Govt will auction 2,300 MHz of spectrum, from which it expects to garner Rs 5.44 lakh cr

Even as the government will soon be auctioning its highest ever lot of telecom spectrum, there might not be an appetite for such a large amount of airwaves, say some analysts.

About 2,300 MHz would be put for auction, from which the government expects Rs 5.44 lakh crore, if all the airwaves are sold at the base price.

The Cabinet approval came on Wednesday; these should begin in September.

“The total to be sold is significantly above the historical amounts sold and we don't see a case for it,” says a note prepared by HSBC, the financial services entity. Its initial analysis, it says, suggests the proceeds are unlikely to exceed $10-12 billion (Rs 80,000 crore) and a lot of spectrum might remain unsold in the 700, 2,300 and 2,500 MHz bands.

EXPERTSPEAK

• A lot of spectrum might remain unsold in 700,2,300,2,500 MHz bands
• Good demand for 1,800 MHz but selective demand for 2,100 MHz and 700 MHz
• Spectrum auction might be delayed to October
• Ecosystem for 700 MHz could be at least three-four years away
• Auction proceeds are unlikely to exceed $12 billion ( Rs 80,758 crore)

KPMG partner Jaideep Ghosh said there would be reasonably good bidding in most bands but selective interest for 700 MHz, due to a high reserve price and lack of an eco-system there.

Analysts also said that as a final decision on the spectrum usage charge has not been taken and the government will be asking the Telecom Regulatory Authority of India to provide a recommendation on these, and the overall process could take a couple of months, the auctions might get delayed to October.

“Seventy per cent of the planned receipts are driven by take-up in the 700 MHz spectrum band. Except for 4G (fourth-generation technology) entrants, none of the existing incumbents have the balance sheet to bid for pan-India 700 MHz spectrum at the current prices,” HSBC said.

It added the incumbents could still participate in the data opportunity by adding spectrum in the 2,100 MHz and 2,300 MHz bands; re-farming 900 MHz for 3G, deploying 4G in the 2,100 MHz band and investing more in indoor coverage.

Bank of America Merrill Lynch said, "We do not expect any irrational bidding in the auctions, given the companies' already stretched balance sheets.”