Spectrum auction to be held on September 29 this year

The Government today announced that the Spectrum Auction will be held on September 29, through which it will allot the right to use for a period of 20 years. Applications are being accepted through its website.

The government will auction a total of 2,354.55 MHz of mobile airwaves frequencies of all bands. The spectrum will be charged at the rate of three percent of AGR excluding the revenue from wire line services. Earlier last month, Telecom Commission had also recommended the same to the Union Cabinet.

"Large chunk of spectrum is being put for auction which aims to address issue of fragmentation, improve quality of service, and rules have been made bidder friendly," said Telecom Secretary J S Deepak while releasing the bid document called the Notice Inviting Application (NIA).

 The total 2354.55 MHz of spectrum being put to auction is worth Rs 5.63 trillion. Apart from the spectrum bands of 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz, the auction will include 197 MHz of additional spectrum in 1,800 MHz band and 37.5 MHz in 800 MHz band.

All the airwaves can be used for 4G services and the 700 MHz, the most expensive one, is likely to bring down the cost of 3G services drastically.

The 700 MHz band alone has potential to fetch bids worth Rs 4 lakh crore if all spectrum in it gets sold at the base price. Bidder interested in buying spectrum in the 700 MHz band will have pay around Rs 55,000 crore for a block of 5 MHz.

"700 MHz is the top quality spectrum. It has beaten gold so it is expensive. We will wait for the auctions to see what the response is," Deepak said.

The Government has assured that the sold spectrum will be assigned within 30 days of bidding and payment. For bands like 700 MHz, 800 MHz and 900 MHz, the companies will have to pay at least 25 percent of the bid amount within 10 days after the auction. The pending amount will have to be paid in 10 annual instalments after two years of moratorium. For rest of the bands, at least 50 percent of payment will have to be made. Also, the Government has slashed the interest rate to 9.3 percent from 10 percent.

The government expects to raise at least Rs 64,000 crore from the spectrum auction this fiscal. To attract bidders, it has for the first time promised to assign spectrum within 30 days of making upfront payment by successful bidders. It has also reduced interest on instalments to 9.3 per cent from about 10 per cent earlier.

Equity lock-in period has been reduced. This will free company, whose networth has been used to procure spectrum, to exit from the company in one year as against five years prescribed earlier.

A pre-bid conference will be held on August 13 by the Telecom Department, which will provide telecom companies an opportunity to get a better clarity. 

In 2015 auctions, Bharti Airtel Ltd, Idea Cellular, Reliance Jio were some of the firms that aggressively bought airwaves. Telecom operators had to bid in 2015 auction for continuing operation as their airwaves was put for sale.

The government has modified the method of calculating spectrum cap in a circle in a way that will allow companies to hold more spectrum compared to earlier levels.

With Reliance Jio foraying into the market, the competition has already been taken a notch higher. The competitors have begun slashing prices and offering new services to lure customers. This inevitably will be the most awaited episode in the telecom sector for this year.