Right approach

Annual, need-based spectrum auction is a win-win for all

The latest round of telecom spectrum auction concluded in just two days, mopping up a little over Rs 11,000 crore in bid amounts. This showed muted demand, but not necessarily a lack of appetite for spectrum, a scarce, natural resource needed to run mobile telecom services. Moving forward, spectrum auctions should be more like this, balanced and need-based, rather than the public spectacle of the past when firms overreached themselves. Even as the Supreme Court in 2012 set the principle of an open and transparent auction of spectrum, a bidding exercise must not be seen as a route to maximise revenue for the government. The bidding that concluded on Wednesday captured that spirit. After the auction, Union Minister of Communications Jyotiraditya Scindia explained why the bidding was muted, pointing out that a large part of the spectrum required was auctioned in 2022. Indeed, two years ago, when the telecom industry was getting ready to roll out their 5G services, which would enable faster download speeds and the next generation of mobile networks, the industry had spent a record Rs 1.5 trillion to buy airwaves.

To put things in context, the low spectrum demand is unlikely to adversely impact the exchequer. The government had set an estimated target of Rs 1.2 trillion of non-tax revenue collection from telecom services in FY25 during the Interim Budget. While there was no official target for the spectrum auction, indications are that the government had modest expectations from the airwaves sale, at around Rs 500 crore of the proceeds as the first instalment in FY25. At the current mopup value of Rs 11,000 crore, the first instalment would exceed the expectations.

On its part, the telecom industry, which has gone through multiple ups and downs over the years, has shown maturity in selecting the bands and frequencies carefully to fill in their needs. In fact, a large chunk of the spectrum bought this time is for renewing airwaves, the permit for which is about to expire. Compared to Bharti Airtel and Vodafone, the old timers, the relatively new player Reliance Jio has bid much less because it’s not facing any spectrum expiry. When compared with the heady 3G spectrum auction round back in 2010, when bidding lasted 34 days, the latest two-day event demonstrates a balanced approach on the part of companies. This also comes soon after the record bidding for 5G airwaves in 2022, prompting telcos to take a breather before exhausting their gunpowder on spectrum purchase.

The government must be complimented for providing the industry an impetus to go shopping for spectrum at their own convenience and timeline rather than rushing to hoard without any visibility on the future road map. The government has contributed to the ease of business in telecom by making annual spectrum auction a stated goal. Also, companies have the option of paying the government in annual tranches for spectrum. That should bring down the financial stress of the telecom industry, which is stuck with a debt of Rs 6.4 trillion as of last year.

Now that Reliance Jio has taken the first step, others too are likely to go ahead with a much required tariff hike to ensure the market does not fall into a duopoly trap. Also, the quality of telecom services must improve, the number of 5G use cases should go up, and the speed of download should match the consumer expectations.