It is ironic that the Telecom Regulatory Authority of India has floated a paper on conducting the next round of spectrum auction at a time when the telecom sector is reeling under tremendous financial stress. Declining revenues, mounting debt and heightened competition have put a question mark on most telecom companies’ future. The department of telecom has also acknowledged this dire condition and even set up an inter-ministerial group to recommend policy measures to revive the once poster boy of reforms. The previous auction held in 2016 had ended with a whimper with the Centre receiving bids worth only ₹65,789 crore. The DoT had invited bids for over 2000 MHz spectrum worth ₹5.3 lakh crore. Not even 60 per cent of the airwaves on the block found any buyers. The spectrum acquired in the said auction is yet to be deployed fully. Operators who bought spectrum in the earlier round still owe about ₹3.08 lakh crore over the next 11 years as per deferred payment plans offered by the Centre. In addition, the telecom industry owes about ₹4.60 lakh crore to various financial institutions and banks.
In view of the industry’s finances, this doesn’t look like a good time to go for a spectrum auction. The Centre may be inclined to view it as a handy tool to shore up the fisc. But a spectrum sale at this juncture could be counter-productive. The operators will end up buying more expensive airwaves which will lead to either an increase in tariffs, or halt investments in rolling out new infrastructure. Or they may just stay away from the auction, as they did in 2016. Neither scenarios are good for achieving Prime Minister Narendra Modi’s vision of Digital India. In India, access to cheap broadband service is still a distant dream for most citizens. The regulator must tell the Centre to stop seeing the telecom sector as the golden goose to bridge its deficit gap. Telecom should be seen as the enabler of social growth achieved through access to affordable broadband.
Pricing of spectrum is another area where the regulator will have to rethink its approach. Steep pricing, especially for the 700 MHz band, resulted in a tepid response from telecom operators in the 2016 auction. The efficiency of this band in terms of coverage and capacity is comparable to the 800 MHz band, yet the regulator had priced the former at nearly twice the reserve price of the latter. As a result, there were no takers for this frequency band. It seems few lessons have been learnt as the regulator has asked, in its latest consultation paper, whether prices revealed in the 2016 auction can be taken as the value of spectrum in the respective bands for the proposed forthcoming auction. Timing and pricing are the two big factors for any successful spectrum auction. Thus far, regulators have floundered in getting the formula right. The TRAI has the benefit of previous experiences to take the right call this time.