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Mega spectrum auction gets government nod

23 Jun 2016 Evaluate

After the major FDI reform push, the government has given its approval for the mega-spectrum auction plan recommended by the department of telecommunication. The government is expected to auction nearly 2,300MHz of spectrum across 7 bands of 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz and it is expected to fetch about Rs 5.66 lakh crore to the exchequer.

Though the final schedules are yet to be confirmed, but the notice inviting application for auction is likely to be issued by July 1, followed by pre-bid conference on July 6. The bidding is expected from September 1. There could be a minor delay in the auctions as the Cabinet decided to seek Telecom Regulatory Authority of India (Trai) opinion on the issue of spectrum usage charge (SUC). The move could result in a delay in the issuance of the notice inviting applications for the auctions as Trai is expected to take some time in finalizing its views on the matter. The 2016 mega-auction is considered to be the biggest spectrum auction seeking Rs 64,000 crore for the government, with a revenue of Rs 98,995 crore from various levies and services.

According to the rules approved by an inter-ministerial panel, the auction would include sale of most premium 700 Mhz band at a reserve price of Rs 11,485 crore per Mhz. A company interested in buying spectrum in 700 Mhz band will need to shell out a minimum of Rs 57,425 crore for a block of 5 Mhz on pan-India basis. This band alone has the potential to fetch bids worth over Rs 4 lakh crore.  Furthermore, the panel has favoured that companies winning spectrum in higher frequency bands - above 1 Ghz like 1800 Mhz, 2100 Mhz, 2300 Mhz - should make 50 per cent upfront payment and the rest in ten years after a 2-year moratorium. In earlier auctions, companies were given option to make 33 per cent upfront payment.

On the otherhand, for spectrum below 1 Ghz band such as 700 Mhz, 800 Mhz, 900 Mhz, companies will require to pay 25 per cent upfront and rest in ten years after a 2-year moratorium. It is in line with practice of earlier auctions but differs from Trai suggestion.


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