Telecom department to kick off mega Rs 96,318-crore spectrum auction on May 20; what does it mean for industry?

The Department of Telecommunications’ on Friday invited applications for auctioning eight radio frequencies to the tune of 10,523.15 MHz for mobile services at a base price of Rs 96,317.65 crore. That includes spectrum unsold from the 2022 auction and radio wave rights up for renewable in 2024, including the pacts by companies undergoing insolvency processes. 

The last telecom spectrum auction was held in 2022, wherein the government bagged record proceeds of Rs 1,50,173 crore. The upcoming auction will be the second such auction after telecom reforms implemented in September 2021. 

Here’s a lowdown on what analysts make of the upcoming spectrum auction. 

First things first, here are some of the key things to know about the spectrum auction: 

• The auction process will begin on May 20 
• Available spectrum in bands 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, 2500 MHz, 3300 MHz and 26 GHz will be on the block 
• Spectrum to be assigned for 20 years
• The last date to submit applications is April 22 
• DoT will release the final list of bidders on May 9
• Successful bidders will be allowed to make payments in 20 equal annual instalments while duly protecting net present value (NPV) at 8.65 per cent interest 
• There will be no spectrum usage charges (SUC) for the spectrum acquired in the auction
• Other spectrum bands have not seen much increase in reserve prices
• Spectrum regulation and payment options are largely unchanged; no change in spectrum sharing, trading, and leasing norms 
• Telecom service providers will be allowed to surrender spectrum after 10 years of effective date of purchase with recourse

How analysts view the upcoming telecom spectrum auctions

Many analysts say the upcoming spectrum auction is likely to have a rather neutral impact on the telecom industry. 

ICICI Direct highlighted that the upcoming auction has "no surprises" as there is no change in regulations. “We assume the upcoming spectrum auction’s success will be limited to renewals, else operators have sufficient spectrum quantities across bands to offer 4G and 5G services,” wrote analysts at the brokerage in a report dated March 10. 

While the DoT has not included any spectrum in the 600MHz and 700MHz bands in the upcoming auction, it has raised the reserve prices for the 3,300MHz and 26GHz bands by 12 per cent and 8.9 per cent, respectively, and increased the 1,800MHz band reserve rate significantly in the UP East circle, the brokerage pointed out. 

Here are some key points about the upcoming auction, as highlighted by the brokerage: 

• 800MHz band: Reserve price hiked only in J&K circle, from Rs 14 crore to Rs 16 crore/MHz; prices across other circles unchanged
• 900MHz band: Rates increased by 12-14 per cent in Assam, NE and J&K circles; prices across other circles unchanged
• 1,800MHz band: Pan-India prices increased by 10.4 per cent; significant increase of 102 per cent in UP East on account of aggressive demand in the previous auction
  • Prices in Kolkata, Maharashtra, Gujarat, AP, Rajasthan, MP, HP, Odisha increased by 11-14 per cent 
• 2,100MHz band: Reserve price increased by 12 per cent in Delhi, Gujarat and Karnataka circles 
• 3,300MHz & 26GHz bands: Reserve prices increased by 12 per cent and 8.9 per cent respectively 
• 2,300MHz & 2,500MHz bands: No change in reserve prices 

Hailing the Cabinet’s decision on the spectrum auction, Union Minister Ashwini Vaishnaw said the upcoming sales of radio waves will provide telecom service providers an opportunity to buy spectrum regularly in a transparent way. 

Meanwhile, here is a summary of how some of the key telecom stocks have fared on Dalal Street:

With inputs from agencies

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