Not a pretty Picture

The upcoming spectrum auctions are likely to get a subdued response despite the steps to woo telecom companies. 

- Manu Kaushik

In early January, the telecom regulator TRAI organised an open-house discussion in Gulmohar Hall at New Delhi’s India Habitat Centre. The aim was to take the opinion of stakeholders before finalising the blueprint for the year’s spectrum auction from which the government expects to net $87.1 billion ( ₹ 5.6 lakh crore). The issues discussed included the quantum of spectrum to be auctioned, block size, rollout obligations and reserve price. The auction is scheduled for September-end.

Those representing telecom companies wanted the government to delay the sale of the 700 MHZ band, the focal point of the auction, says an executive of a telecom company. They argued that their companies were financially strained and would find it difficult to pay for this expensive band. Plus, the device and equipment ecosystem for this band was not fully developed, they said. In spite of these objections, the telecom ministry has decided to go ahead and sell the 700 MHZ spectrum too, though it has, at the same time, also taken steps to make things easier for telecom companies – it has reduced the equity lock-in period from three years to one year, slashed the interest rate for the deferred payment option from 10 per cent to 9.3 per cent, eased the rollout obligations, and lowered the spectrum usage charge or SUC.

However, experts say these measures are unlikely to help telecom companies, as they have been left with little financial muscle after paying through their nose for spectrum and acquisitions over the years. The spectrum cost is the biggest deterrent and the government has done nothing to bring it down, they say. Airtel India’s MD and CEO Gopal Vittal has said on several occasions in the past that the price of the spectrum is unaffordable for them. Airtel is India’s largest telecom company.

The False Rationale