“The industry is divided; some operators want airwaves at current price, rest want it either at a reduced price or don’t want an auction right now,” a senior DoT official told ET.
“Under the reverse auction model, one could put up all bands for auctions. The bandwidth which doesn’t elicit any response will automatically see a cut, say of 10% in the reserve price. This can once again be repeated till we hit a floor cap, say of 25% below the reserve price, after which we pull the particular bandwidth out of the auction and continue to sell the rest,” the official added.
As reported earlier by ET, new entrant Reliance Jio Infocomm has backed an auction of both 4G and 5G airwaves in the current fiscal year at the prices recommended by the sector regulator, Telecom Regulatory Authority of India. Second largest telco Bharti Airtel, however, is keen on a sale of only 4G airwaves in the current fiscal year and has sought a reduction in the price of sub 1 GH bands.
Market leader Vodafone Idea doesn’t want auctions till 2020. Its chairman, Kumar Mangalam Birla, has recently told top finance and telecom ministry officials that the severe liquidity crunch it was facing may force the telco to default on a Rs 900 crore spectrum-related charge it must pay the government in March.
This has nudged the government to consider some relief measures for the sector at large, with telecom and finance ministry officials having discussed Birla’s proposals that the period of payment for spectrum purchases be increased to 18 years from the current 16, extended the two-year moratorium to three, besides spreading the payment of Vodafone Idea’s Rs 900 crore into 12 instalments. Birla also flagged high levies in the telecom sector — nearly a third of a telco’s revenue goes to the government in the form of different levies — and the recent hike in import duty of telecom equipment apart from the Rs 30,000 crore that is locked up on account of GST payment under the ‘reverse charge mechanism’.
“The way out of such a problem is to not only ease the stress on the sector but to also ensure it grows which will help to revive the sector faster. Thus, the auctions must be designed keeping these points in mind,” the senior official said.
Further, DoT feels that auctions should be made an annual event, with the government putting up for sale whatever bandwidth it has.
“See, all players want different things, we want to ensure that we sell bandwidth on time and of course at prices which are not exorbitant for the sector and that is why we are now considering the reverse auction model,” the official said, adding that the petroleum ministry is currently following the model.
“This way, we don’t lose value of the precious spectrum lying with us and whosoever wishes to buy or needs more bandwidth can buy. If any bandwidth fails to generate demand after it hits the floor price also, then we put it up for auction next year,” the official added.
In August, Trai recommended the starting prices for spectrum in the 4G bands of 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2100 MHz, 2300 MHz and 2500 MHz, besides 5G airwaves in the 3300-3600 MHz bands. It didn’t mention a specific timeline for the sale.
While deciding on the timing and the modalities of the next sale, the communication ministry would need to factor in the views of the finance ministry which needs funds to meet its fiscal deficit target of 3.3% for FY18-19 and for social sector spending in the run-up to the general elections in 2019.
The government has budgeted in FY19 revenue from the sector at Rs 48,661.42 crore, a 58% rise from the year ago, but far lower than the Rs 78,715 crore it received in FY16-17 with the October 2016 bandwidth sales.
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