Bids for the upcoming spectrum auction may not exceed Rs 80,000 crore due to stressed balancesheet of telecom operators and lack of ecosystem to encash premium airwaves in 700 Mhz band, an analysis by HSBC Global Research shows.
"Our initial analysis suggests that total proceeds from spectrum auction are unlikely to exceed USD 10-12 billion (about Rs 80,000 crore) and we believe a lot of spectrum might remain unsold in 700, 2300, 2500 MHz bands. We see good demand for 1800 MHz, selective demand for 2100 and 700 Mhz bands," the report said.
In the last auction, the government had received bids worth Rs 1.1 lakh crore.
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The telecom sector is staring at a debt load of close to Rs 3 lakh crore.
Leading operators have sought deferring the sale of 700 MHz spectrum, saying ecosystem for providing services in this band is not developed and would lead to underutilisation of the spectrum for several years, blocking industry's funds.
"Further ecosystem for 700 MHz band from an Indian context could be at least 3-4 years away. To sum up, we see limited and selective demand for spectrum in 700 MHz band," it noted.
The government plans to raise USD 83 billion (about Rs 5.56 lakh crore) from the upcoming spectrum auction, which will be potentially 2.8 times current revenues from the sector with an average net and debt Ebitda ratio of 4 times, the report said.
"Total spectrum to be sold in the upcoming auction exceeds 2,200 MHz, which is significantly above historical amounts sold and we don't see a case for it," it added.
The Cabinet on Wednesday approved the mega spectrum auction plan, in which airwaves worth Rs 5.66 lakh crore for mobile services will be put up for auction.
In the bidding, all airwaves available with the government for mobile services at present will be auctioned. It includes airwave frequencies in 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz.
Trai had recommended a pan-India reserve price of Rs 11,485 crore for 700 MHz, Rs 5,819 crore for 800 MHz, Rs 3,341 crore for 900 MHz, Rs 2,873 crore for 1800 MHz, Rs 3,746 crore for 2100 MHz, and Rs 817 crore each for 2300 MHz and 2500 MHz bands.
The premium 700 Mhz band worth Rs 4 lakh crore is to be auctioned at a reserve or base price of Rs 11,485 crore per Mhz. The cost of delivering mobile services in this band is estimated to be around 70 per cent lower than 2100 Mhz band, which is used for providing 3G services.
"700 MHz spectrum in high subscriber density/large coverage markets like Bihar, UP, Rajasthan and West Bengal is cheaper than 900 MHz and incumbent telcos have the option to add 700 MHz spectrum selectively," the report said.
Mobile frequencies in all bands -- 700 Mhz, 800 Mhz, 900
Mhz, 1800 Mhz, 2100 Mhz and 2300 Mhz -- will be put on the block in the upcoming auction. All the radiowaves being put up for auction can be used for providing high-speed 4G services.
The Finance Ministry in the Budget pegged the revenue target at Rs 98,995 crore from the telecom space, which includes Rs 64,000 crore from the auction of about 2,354.55 Mhz of spectrum and the rest from various levies and services this financial year.
As per DoT, Tata Teleservices can bid for spectrum in all bands in Mumbai and Maharashtra circles, and 800 Mhz band (known as CDMA service band) across all circles except Assam and North East (NE), and 900 Mhz in all circles barring Assam, NE and Delhi.
It can bid for 3G spectrum in Gujarat, Haryana, Karnataka, Kerala, MP, Maharashtra, Mumbai, Punjab, Rajasthan and UP (West). It is not eligible to bid for premium 700 Mhz band spectrum except in Mumbai and Maharashtra.
