Low bandwidth

Aggressive bidding by Reliance Jio has saved the Centre from the embarrassment of another failed spectrum auction. Of the ₹77,800 crore to be received by the Department of Telecom, Reliance Jio on its own has acquired spectrum worth ₹57,100 crore. The Centre can take solace that the latest round of spectrum auction is slightly better than the previous round held in 2016 when it received only ₹65,789 crore. Yet, the auction can hardly be termed a success. The fact of the matter is that only 37 per cent of the spectrum available was sold. All the spectrum sold were acquired at the reserve price, which means that there was no competitive bidding. This raises questions about the efficiency of the auction design and the manner in which the high reserve price has been arrived at. The existing auction model was designed in 2010 when there were seven-eight operators. Now, the market has only two strong players and two others that are struggling to stay afloat. In this context, the Department of Telecom and the Telecom Regulatory Authority of India should rethink the auction model. Perhaps, the asset sale process followed by the Insolvency and Bankruptcy Code wherein bidders are asked to place their best bid in a sealed cover can be considered.

The other area of concern is the reserve price for the crucial 700 Mhz band. The Centre received zero bids for this band as the operators found it to be very expensive. This is the second time this band is going unsold. While the 700MHz spectrum price has been cut by 43 per cent since 2016, it still remains very expensive. An operator would have to spend nearly ₹65,000 crore to own 10 MHz of spectrum pan-India, and it would need at least 30 Mhz of spectrum in this band to provide meaningful 5G services. The DoT and TRAI appear to be disconnected from the ground realities while fixing the reserve price. They should keep in mind the fact that industry revenue and profitability have only worsened significantly since the last auction. The sector is under a huge debt pile of nearly ₹5-lakh crore.

The dynamics of spectrum supply and demand have undergone a sea change. Multiple spectrum auctions over the last few years, consolidation among operators, and trading of airwaves have led to a situation where there is enough spectrum available to the operators. With only a handful of operators in the fray, the need to hoard spectrum for future use has receded. Besides, the operators are still in the process of rolling out 4G networks on spectrum acquired in the previous auction. Operators are likely to acquire spectrum only when they need it. Higher spectrum cost will put pressure on operators to either increase tariffs or halt investments in infrastructure. Neither is good for achieving Prime Minister Narendra Modi’s vision of Digital India.

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