Not a Pretty Picture
Representatives of telecom companies wanted the government to delay the sale of the 700 MHz band, the focal point of the auction. They argued that their companies were financially strained and would find it difficult to pay for this expensive band.
- Aug 22, 2016,
- Updated Aug 25, 2016 10:58 AM IST
In early January, the telecom regulator TRAI organised an open-house discussion in Gulmohar Hall at New Delhi's India Habitat Centre. The aim was to take the opinion of stakeholders before finalising the blueprint for the year's spectrum auction from which the government expects to net $87.1 billion (Rs 5.6 lakh crore). The issues discussed included the quantum of spectrum to be auctioned, block size, rollout obligations and reserve price. The auction is scheduled for September-end.
Those representing telecom companies wanted the government to delay the sale of the 700 MHz band, the focal point of the auction, says an executive of a telecom company. They argued that their companies were financially strained and would find it difficult to pay for this expensive band. Plus, the device and equipment ecosystem for this band was not fully developed, they said. In spite of these objections, the telecom ministry has decided to go ahead and sell the 700 MHz spectrum too, though it has, at the same time, also taken steps to make things easier for telecom companies - it has reduced the equity lock-in period from three years to one year, slashed the interest rate for the deferred payment option from 10 per cent to 9.3 per cent, eased the rollout obligations, and lowered the spectrum usage charge or SUC.
The steps to woo telecom companies may not be very effective. Take SUC. Every telecom operator is required to pay SUC to the government. It has varied from 3 per cent to 8 per cent of adjusted gross revenues in the past. The Department of Telecom has capped it at 3 per cent for future auctions. For existing spectrum, it will use a weighted average method to arrive at a figure. While this will not make any difference to telecom companies' SUC outgo immediately, the benefits will start flowing in the long term as their subscriber base expands. However, the move to reduce the interest rate for deferred payments will benefit the industry somewhat as most operators pay for spectrum in instalments. "The lowering of the rate is a function of falling interest rates," says ICICIdirect.com's Tiwary.
The government has also eased the rollout obligations. But most experts say there are enough instances of companies not meeting these obligations anyway. The most glaring example is RJio. It was awarded BWA spectrum in 2010, and as per the rules had to launch services by 2015. It has not been able to do so till date.
Maybe the government is waiting for a miracle this time.
In early January, the telecom regulator TRAI organised an open-house discussion in Gulmohar Hall at New Delhi's India Habitat Centre. The aim was to take the opinion of stakeholders before finalising the blueprint for the year's spectrum auction from which the government expects to net $87.1 billion (Rs 5.6 lakh crore). The issues discussed included the quantum of spectrum to be auctioned, block size, rollout obligations and reserve price. The auction is scheduled for September-end.
Those representing telecom companies wanted the government to delay the sale of the 700 MHz band, the focal point of the auction, says an executive of a telecom company. They argued that their companies were financially strained and would find it difficult to pay for this expensive band. Plus, the device and equipment ecosystem for this band was not fully developed, they said. In spite of these objections, the telecom ministry has decided to go ahead and sell the 700 MHz spectrum too, though it has, at the same time, also taken steps to make things easier for telecom companies - it has reduced the equity lock-in period from three years to one year, slashed the interest rate for the deferred payment option from 10 per cent to 9.3 per cent, eased the rollout obligations, and lowered the spectrum usage charge or SUC.
The steps to woo telecom companies may not be very effective. Take SUC. Every telecom operator is required to pay SUC to the government. It has varied from 3 per cent to 8 per cent of adjusted gross revenues in the past. The Department of Telecom has capped it at 3 per cent for future auctions. For existing spectrum, it will use a weighted average method to arrive at a figure. While this will not make any difference to telecom companies' SUC outgo immediately, the benefits will start flowing in the long term as their subscriber base expands. However, the move to reduce the interest rate for deferred payments will benefit the industry somewhat as most operators pay for spectrum in instalments. "The lowering of the rate is a function of falling interest rates," says ICICIdirect.com's Tiwary.
The government has also eased the rollout obligations. But most experts say there are enough instances of companies not meeting these obligations anyway. The most glaring example is RJio. It was awarded BWA spectrum in 2010, and as per the rules had to launch services by 2015. It has not been able to do so till date.
Maybe the government is waiting for a miracle this time.