The government will get an additional revenue of 20 per cent from the auction of the 1,800 MHz and 900 MHz bands of spectrum, based on the Telecom Commission’s recommendations, compared with those of the Telecom Regulatory Authority of India (Trai).
Based on the assumption that the base price will also be the valuation price and all the spectrum on offer was up for sale, the government can make Rs 29,500 crore (Rs 295 billion) from the coming auction, expected in January 2014.
The figure would be Rs 24,458 crore (Rs 244.58 billion), by Trai’s recommendations. If the 800-MHz spectrum auction is also included, for which the pricing has not been decided, it could be another bonus.
In the year’s Budget, the government had fixed an ambitious revenue target of Rs 40,847 crore in FY14 from spectrum auction and other fees from telecommunication companies.
The most valuable spectrum will be 900 MHz in the cities of Delhi, Mumbai and Kolkata, which alone is expected to fetch Rs 11,873 crore, based on the new base price.
As much as 15 MHz of the 900 MHz band spectrum in Delhi and Mumbai and 12.5 MHz in Kolkata will be up for grabs.
Analysts say competition would be bitter with the government deciding not to reserve any spectrum for the incumbent operators, whose licences are due to expire next year.
Most of the incumbent operators have more than five MHz of spectrum (up to eight MHz) in these cities and are expected to fight fiercely to retain all of it.
Also, new players such as Reliance Jio and Videocon are expected to join in as the liberalised 900 MHz spectrum is considered the best band for 4G LTE (long term evolution) rollout rather than the 2,100 MHz band that broadband wireless access players are using now for the rollout.
As a result, the price of the 900 MHz spectrum is expected to go up sharply.
In the 1,800 MHz band, there is still a lack of clarity on how much spectrum will be available for the auction. Since the defence forces occupy a large portion of the 1,800 MHz spectrum, it is not clear how much of the band will be available for auction.
Going by conservative estimates, 10 MHz of spectrum will be available in each circle and the government will be able to earn Rs 17, 640 crore based on the new base price.
Even here, once could expect competition. In the three metros of Delhi, Mumbai and Kolkata, incumbent operators who are not able to retain their existing spectrum will have to buy additional amounts in 1,800 Mhz. Otherwise, their services could be in trouble.
Incumbent operators with 900 MHz of spectrum in other circles, which they have to give back over the next few years, might be keen to pick up additional spectrum in the 1,800 MHz band for future growth and as an insurance if they fail to retain their spectrum in the 900 MHz band.