Predictable frequency

Annual spectrum auction will help telcos

In a positive development, the Union government has announced holding a telecom spectrum auction starting May 20. Almost the entire range of frequency bands that remained unsold in the previous auction, in 2022, will be up for sale this time. This will give an opportunity to telecom companies (telcos) to make a choice, depending on what the priority for them is at this point. With auction becoming much more frequent, moving on to an annual exercise like in some other countries, telcos won’t be in a rush to hoard spectrum at a high cost any longer. This will help companies manage their finances better. In the past, most telcos spent excessively to buy spectrum because there was no clarity on the timing and spread of future auction. Although airwaves are a scarce resource, the government, by deciding on annual auction, has sent out a welcome message that revenue maximisation is not the objective of the bidding process.

In its notice last week, the Department of Telecommunications announced auction for eight high-frequency spectrum bands from May 20, inviting bid applications from telecom operators by April 22. This follows Cabinet approval last month of auction of 10,523 MHz of spectrum across bands at a reserve price of Rs 96,317.65 crore. The auction would cover the 800, 900, 1800, 2100, 2300, 2500, 3300 MHz and 26 GHz bands, making up for a large chunk of voice and data spectrum. Even while putting up most unsold airwaves (during the previous auction) on sale, the government has kept the 700 MHz band — the highest valued in the most recent auction — out of the purview of the May auction. Since only Reliance Jio had acquired airwaves in the 700 MHz band in the last auction, the upcoming round could have included this frequency to offer a chance to those that had missed out earlier. In the case of 700 MHz, the signals travel longer distances than the higher frequencies used by telcos. Networks using 700 MHz spectrum require fewer cell towers to reach the same geographic area.

The reserve price for all the bands put up for bidding is close to Rs 1 trillion but telecom companies have indicated that their appetite at this point is not very high because they had bought across multiple bands during the 5G auction of 2022, which had garnered the highest one-time spectrum revenue so far at Rs 1.5 trillion. This time, most companies will look to refill airwaves in frequencies which are close to their expiry date. Like earlier, telcos will have the right to use the spectrum for 20 years from the date of frequency assignment. According to the guidelines, a foreign entity is allowed to participate in the auction directly and apply for a licence through an Indian company in which it can hold a 100 per cent stake under the automatic route for foreign direct investment. As for new entrants in telecom (which do not hold spectrum), they will have to show a net worth of Rs 100 crore per licence service area, including Rs 50 crore each for Jammu & Kashmir and the Northeast. While the government has moved in the right direction in spectrum auction for mobile phone services, the allocation of airwaves for satellite services too must be expedited for the sector to increase the scope of services.