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Govt's Budget revenue target from telecom too conservative

Total spectrum auction bid amount could be more than the Rs 43,000 crore the finance minister seems to have estimated

Sounak Mitra  |  New Delhi 

Finance minister Arun Jaitley’s target for revenue from the sector in 2014-15, announced in his maiden Budget last year, seems rather conservative. Though his target, at Rs 45,471 crore, was 16.7 per cent higher than the interim budget estimates, it did not take into account the auction of in all bands — 800, 900, 1,800 and 2,100 MHz — simultaneously.

The Budget estimated the sale of 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 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).

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Besides, 29 licences in 18 zones are coming for renewal in the 900-MHz band. Companies will also look to win 2,100-MHz spectrum for enhancing their footprint and could acquire additional 1,800-MHz spectrum for long-term evolution (LTE) services.

In February last year, had auctioned 385.2 MHz of spectrum in the 1,800-MHz band, of which 307.2 MHz were sold. Besides, all spectrum (46 MHz) in the 900-MHz band in the Mumbai, Delhi and Kolkata circles was taken. The total bids received were to the tune of Rs 61,162.22 crore, of which the government received Rs 18,296 crore in the year ended March 2014.

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 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, 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.

Telecom operators have already expressed their happiness over Trai’s recommendations to auction all spectrum in the 2,100-MHz band for commercial use, simultaneously with 800-MHz, 900-MHz and 1,800-MHz bands, as this would help relieve acute spectrum crunch faced by the telcos. “It is essential that the fundamental resource of spectrum is augmented to support this objective, which is common to the government and the industry. Overall, we are happy with the approach of the regulator in acknowledging the needs for an emerging mobile broadband network in the country,” said Rajan Mathews, director-general of the Cellular Operators Association of India, telecom operators’ lobby.

First Published: Thu, January 01 2015. 22:50 IST