Fresh auction with reduced price for 700 MHz cannot be ruled out: ICRA

Credit ratings agency ICRA expects a fresh auction with reduced price for 700 MHz, following the industry feedback in form of non-participation in the 700 MHz band and the quantum of spectrum remaining unsold. Although 700 MHz band has higher efficiency for data services, it was expensively priced and the ecosystem around the band is not fully developed, which resulted in no participation in this band, the agency said.

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The agency said the auction participation was muted because, compared to the past auctions, the telcos did not face any spectrum expiry risks this time and focused largely on filling gaps in their spectrum holdings, primarily for data services.

“Limited financial flexibility of the industry, impacted by elevated debt levels, constrained the Indian telecom operator’s participation in the just concluded auction. The fact that auctions are a regular industry feature gives the telcos the flexibility to wait for the next round,” it said.

The auctions will now send the telecom sector’s debt to Rs 425,000 crore, up from Rs. 4,10,000 crore as on March 31, 2016. According to ICRA’s estimates, the consolidated debt level of the industry stood at Rs 2,90,000 crore as in March 2014.

The Industry has already seen an equity infusion of Rs. 47,700 crore in Vodafone India which was largely used to retire outstanding debt.

The largest spectrum auction, in terms of the quantum and value of spectrum put to auction, concluded with around 60% spectrum remaining unsold. In value terms, the Government (GoI) garnered only 12% of the spectrum value – Rs. 65,789 crore as against Rs. 5,67,328 crore worth of spectrum put to auction.

As per the payment plan offered to the telecom companies (telcos), the GoI would receive approximately Rs. 32,000 crore upfront, which is lesser than its estimated budget target.

“The spectrum auction results are in line with ICRA’s earlier estimates of Rs. 60,000 – 65,000 crore, with no interest in the 700 MHz band. As against the Rs. 5.67 lakh crore valuation of spectrum at reserve price, only Rs. 65,789 crore was sold. All the telcos who participated have acquired spectrum, with action focused in the supra 1 GHz bands, because of relatively cheaper valuation. Spectrum acquisition for bolstering the data capabilities has been the theme of these auctions.” Harsh Jagnani, VP – Corporate Ratings, ICRA Limited said.

Jagnani said that “However, despite the modest participation, post the auctions, the debt levels of the industry would remain elevated at an estimated level of Rs. 4,25,000 crore. We estimate the industry debt/OPBDITA to remain weak.”

The Department of Telecommunications (DoT) had planned the largest spectrum in the history of Indian telecom industry, by putting 2354.55 MHz spectrum on auctions with a value of Rs. 5.67 lakh crore.

The spectrum put to auction was spread across seven bands viz. 800 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2300 MHz apart from two new bands viz. 700 MHz and 2500 MHz. Out of the total value of spectrum of Rs. 5.67 lakh crore, more than 70% was from 700 MHz band.

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23 Comments on "Fresh auction with reduced price for 700 MHz cannot be ruled out: ICRA"

 

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Asdfb
October 12, 2016 9:13 am 9:13 AM

900 MHz band lte it is possible ??
Why 700 MHz ??

Munnu
October 8, 2016 10:59 pm 10:59 PM

700mhz has lost its shine completely. I don’t think operators are interested in this band anymore, even if they reduce its price to half of the current price. 1800 mhz is Gold standard for LTE and operators got that enough already. Operator should move forward and spend more infrastructure now.

Garry
October 8, 2016 10:58 pm 10:58 PM
At the moment in 4g scenario, its just avoid + Jio and small players like rcom or Telenor, i don’t see them in long run. Once after gaining customer base, what if jio joins avoid too. For the sake of customers, competition should be maintained at least by an public sector company. So i feel 700 mhz should be awarded to BSNL at reasonable price. Network coverage is always issue with bsnl 3g if not bsnl 2g in north india. The spectrum will help them provide better coverage and packs price is never an issue with BSNL. Its high time… Read more »
Arena
October 8, 2016 11:48 pm 11:48 PM

+100 very good idea. Bsnl should get it at lower price. Tell rest all Low price for bsnl bcz no bids and its irrational to charge base price when no bids. Till someone bid in next auction ,5mhz block should be given to bsnl at nominal fee. After next auction bsnl should pay the highest bid amount.

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