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.