No demand for premium bands

The two most premium bands of 700 MHz and 2500 MHz which can actually propel 5G telecom services in India, did not find any buyers at the auction. It was the 700 MHz that the government had tried to auction in 2016 but even then, it did not find any buyers. The big demand came for the 800 MHz band that saw 65% absorption. The other bands that saw good demand were the 900 MHz and the 1800 MHz bands. The big question remains as to why the 700 MHz band was not seeing interest in the last two auctions. Companies have admitted that the reserve price set by the government was just too high. Also, the 700 MHz and the 2500 MHz bands would require the telecom companies to also invest additionally in infrastructure to make their existing set-up ready for the higher bands. That is something the telecom companies were not willing to undertake at this point of time. More so, Bharti Airtel and Vodafone still owe huge sums to the government as AGR charges and SUC fees and that already has put their finances under pressure. 

Who gains the most

Clearly, a chunk of the bands auctioned went to Reliance Jio. Out of Rs.77,184 crore worth of spectrum auctioned in the week, Jio cornered spectrum worth Rs.57,000 crore across 22 circles. Bharti followed with spectrum to the tune of Rs.18,000 crore allotted during the spectrum auctions. However, most of the action continued in the 800 MHz and the 900 MHz bands.  Vodafone has put in less than Rs.2000 crore on spectrum purchase but that was expected due to the tight financial spot it finds itself in. The real disappointment was that the government could have been liberal in setting the reserve price so that more spectrum could have been auctioned. The government, however, has opted to focus on the low-hanging fruits. 

Spectrum revenues fall short

The government has been counting on upfront spectrum fees to fill the budget gap this year. How much is government  earning this year? The upfront charges are 25% for lower bands and 50% for higher bands. In the current context, the government will earn about Rs.27,000 crore as upfront payment of which nearly Rs.20,000 crore will come in before the end of this fiscal. Clearly, the government was budgeting much higher based on its reserve price value of Rs.392,000 crore in the auction. The government could have focused on the premium band spectrums, instead.