Spectrum auction: Steep pricing of 700 MHz keeps operators away; govt set to lose Rs 4 lakh crore

Steep pricing of 700 MHz band kept operators away from bidding for the efficient frequency band that alone had the potential to fetch over Rs 4 lakh crore at base price to the government, says the industry.

The auction, which was billed as the country’s largest sale of airwaves to date in terms of quantity, lasted only for five days. However, right from the first day, no activity was seen in the 700 MHz frequency band.

The debt-ridden telecom sector ignored premium airwaves in the 700 Mhz band – which was put for sale for the first time – at a reserve or base price of Rs 11,485 crore per Mhz.

According to industry body Cellular Operators Association of India (COAI), the financial strain on the industry and a high reserve price were the major reasons for the 700 MHz band not attracting any bidder.

Terming the high pricing of the 700 MHz band as “unrealistic”, COAI Director General Rajan S Mathews said that it is hopeful that the government and the Department of Telecom will take cognizance of the role a high reserve price had on bidding.

“We hope the government will recalibrate the price so that spectrum in the band could be put up for auction, maybe two years from now,” Mathews added.

The country’s largest operator Bharti Airtel said despite the large amount of spectrum made available, certain bands did not get any bid from the operators as “it made no economic case for them based on the high reserve prices”.

“The pricing of the 700 Mhz band spectrum needs to be addressed on priority for the nation to benefit from the digital dividend arising out of this high quality spectrum band,” the company said.

The government was placing big bets on the 700 MHz band. Telecom Secretary JS Deepak had earlier stated: “700 MHz is the top quality spectrum. It has beaten gold so it is expensive.”

He had added that one would, however, wait for the auctions to see the response.

If the entire spectrum in the 700 MHz band had been sold even at the base price, the government could have garnered over Rs 4 lakh crore.

According to industry experts, 700 Mhz band is expensive but the cost of providing service through it is about one-third of 3G under the 2,100 Mhz band as the former is highly efficient.

Even spectrum in 900 Mhz band did not find any takers.

“Government must review the prices differently… Reserve prices are and should be intended to ensure that there are no speculative and non-serious bidding,” telecom consultant Mahesh Uppal said.

However, he added that the government should allow market to determine the actual price of 700 MHz band.