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Telcos pay through the nose for 900 MHz spectrum

Battle now on for 1800 MHz; Government revenue take soars

After over a week of the spectrum auction process, some trends emerged. First, the revenues for the Indian Government are well ahead of expectations. Second, many analysts think that there is too much competition especially for the 900 MHz band. Companies are paying too much for spectrum, so their debt levels will rise significantly.

While Bharti Airtel and Vodafone are trying to retain their old spectrum in the 900-MHz band, the entry of Reliance Jio and Idea Cellular has pushed up prices. On the sixth day of auctions, the price of the 900-MHz spectrum band in Delhi shot up to 104 per cent of the original reserve price to Rs 734 crore for a MHz of airwave.

According to market analysts, the battle had by Tuesday shifted to the 1,800 MHz band as incumbent operators had more clarity on how much spectrum they would get in the 900 MHz band. Bharti Airtel and Vodafone will have to buy spectrum in the 1,800 MHz band in the circles where they already have 900 MHz band spectrum, if they fail to retain their existing holding. The entry of Reliance Jio and Idea Cellular have further pushed up prices. For the 1,800-MHz band, demand was excess in areas like Assam and Maharashtra. The price jumped 201 per cent of the reserve price in Assam, 38 per cent in Delhi and 51 per cent in Maharashtra.

At Tuesday's provisional winning price, the government would make Rs 58,000 crore from the 1,800-MHz and the 900-MHz band. This is 53 per cent higher than the value of the entire spectrum being auctioned at reserve price (Rs 37,903 crore). Just selling 46 MHz of spectrum in the 900-MHz band in Delhi, Mumbai and Kolkata will get the government Rs 23,472 crore, even if sold at the provisional winning price for the sixth day.

According to the Budget target, the government hopes to earn Rs 11,343 crore from spectrum auction this year. As companies have the option to pay in instalments, they will have to pay 25 per cent of the total bid amount for the 900-MHz band and 33 per cent of the total bid amount in the 1,800-MHz band.Based on Tuesday's provisional winning price, the government will get more than Rs 17,200 crore for the current financial year from the ongoing spectrum auction.

From Business Standard

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