Clearing a low bar: On spectrum sale

The government must take a relook at spectrum auction formats, unrealistic pricing, and regulatory norms

India’s latest auction of telecommunications spectrum is a qualified success from the Centre’s perspective, mainly because the winning bids cumulatively exceeded the government’s own low expectations for receipts from the sale of airwaves. A total of 855.6 megahertz was successfully bid for — out of the 2,308.8 MHz that was on offer — as the three largest telecom services providers sought to optimise their purchases of radio spectrum by seeking to acquire only what they deemed essential airwaves, either as renewal or for strengthening their network, while entirely avoiding costlier bandwidth offerings. The newest entrant to the industry, Reliance Jio, was also the most acquisitive, as the Reliance Industries unit accounted for close to 60% of the spectrum bought at 488.35 MHz and contributed almost three-fourths of the ₹77,815 crore that the Department of Telecommunications garnered from the sale. That Jio’s ₹57,123 crore by itself surpassed the government’s estimate of ₹45,000-₹50,000 crore for takings from the auction where the reserve price for the entire spectrum on offer across seven bands amounted to about ₹3.92-lakh crore, tells its own tale. Clearly cognisant of the prevailing overall economic circumstances amid the COVID-19 pandemic as well as the high level of indebtedness in the industry, the government appears to have tempered its expectations to a more realistic level. Still, the Centre can hardly be sanguine about an outcome where a mere 37% of the airwaves on offer found takers.

In a repeat of the 2016 auction’s outcome, the significantly more efficient 700 MHz was yet again shunned by all bidders given its prohibitive reserve price. It is a little hard to fathom the government’s approach to pricing this nationally valuable resource, especially given its avowed intention of accelerating the digitisation of the economy including the broadening and deepening of the digital delivery of the multitude of public services to India’s farthest reaches. The relatively low frequency 700 MHz, for instance, is considered as ideal for enhancing network availability and reach in the highly urbanised settings of large, densely built-up cities where the issue of poor signal penetration inside buildings is a perpetual bugbear for users and providers alike. For all the brave talk on the auction’s outcome providing assurance, the nation’s telecom authorities need to take a hard look at the entire policy framework that has contributed a fair share to the current precarity in the industry. From auction formats that may no longer be relevant given the sharply reduced number of players, to grossly unrealistic pricing of spectrum, and regulatory norms and tax practices that threaten to tip the sector into an unhealthy and fractious duopoly, the government has its task cut out. It must now act quickly to ensure it does not end up hurting the very sector that has become a key multiplier of economic empowerment and progress.

Contact us

 Get in touch