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4G Spectrum Auction Ends Bids For Rs 77,814 Crore – Free PDF Download

 

 

What are spectrum auctions?

  • Devices such as cellphones and wireline telephones require signals to connect from one end to another.
  • These signals are carried on airwaves, which must be sent at designated frequencies to avoid any kind of interference.

 

Why is spectrum being auctioned now?

  • The last spectrum auctions were held in 2016, when the government offered 2,354.55 MHz at a reserve price of Rs 5.60 lakh crore.
  • Although the government managed to sell only 965 MHz – or about 40% of the spectrum that was put up for sale – and the total value of bids received was just Rs 65,789 crore,
  • The need for a new spectrum auction has arisen because the validity of the airwaves bought by companies is set to expire in 2021.

What has happened?

  • The government wrapped up an auction for fourth-generation, or 4G, airwaves, generating ₹77,814.80 crore in proceeds, or about a fifth of the spectrum value put on sale.
  • It, however, claimed the auction was a success as demand “far exceeded” its modest expectations.
  • Reliance Jio Infocomm Ltd, India’s largest telco, emerged as the top bidder, cornering roughly three-fourths of the spectrum sold in the two-day event.
  • Given the covid scenario and other stress situations the sector is facing, we had anticipated spectrum sold would be ₹45,000-50,000 crore. We are happy that the industry is confident, and it has bid to acquire more,“
  • Anshu Prakash, secretary, department of telecommunications (DoT), told reporters on Tuesday.
  • Analysts had estimated that the auction will fetch the government about ₹60,000 crore.

Aggressive bidding from JIO

  • Jio has acquired 488.35 MHz of airwaves across three bands – 800 MHz, 1800 MHz and 2300 MH.
  • The spectrum, worth Rs 57,122.65 crore, is much higher than the industry estimates.
  • Jio has about 8 MHz of spectrum expiring this year (in 800 MHz band) for which it was expected to shell out Rs 23,863.8 crore, as per Credit Suisse estimates in January.
  • The telco will now end up paying much more to bolster its spectrum holding.
  • The telco claims that the recent acquisitions would increase its overall spectrum footprint by 55% to 1717 MHz (uplink+ downlink).
  • Similarly, it was expected that Airtel would largely renew the spectrum in 900 MHz and 1800 MHz that’s due to expire this year, and its total outgo would be around Rs 13,500 crore.
  • However, Airtel went a step ahead and acquired spectrum in 800 MHz, 2100 MHz and 2300 MHz as well (in addition to 900 MHz and 1800 MHz) worth Rs 18,699 crore.
  • Vodafone, on the other hand, was modest with acquiring airwaves. It has acquired just 11.9 MHz of spectrum for Rs 1,993.4 crore – much lower than the industry estimates.

When the telecoms need to pay?

  • Telcos need to pay upfront 25% of spectrum won in the 700 MHz, 800 MHz and 900 MHz bands, and 50% of the rest of the bands (1800, 2100, MHz etc. bands).
  • The rest is to be paid in 16 annual instalments after a two-year moratorium.
  • According to the DOT, the payment is to be made in 10 days post the issue of demand notice which is expected to be released within the next 7-10 days
  • Spectrum Usage Charges (SUC) for the spectrum acquired in this auction will be payable at the rate of 3% of Adjusted Gross Revenue (AGR) of the licensee, excluding revenue from wireline services
  • The government will, however, get just ₹19,000-20,000 crore in the year to 31 March from the latest sale as auction rules allow operators to stagger payments.
  • Still, the money will be crucial for the government as it stares at a record fiscal deficit of 9.5% this year.

What about 5G?

  • Prakash said there is a possibility that the 700MHz band could be used in the next spectrum auction for 5G services.
  • The 700MHz band can support 5G due to its high efficiency, which also makes it the most expensive in the latest auction.
  • Prakash told the panel that 5G, in DoT’s assessment, will be rolled out by the end of 2021 but not on a pan-India basis.
  • The next-generation wireless technology will be launched in “select areas where the demand would justify the capex“.

Q) In India, which of the following review the independent regulators in sectors like telecommunications, insurance, electricity, etc.?

  1. Finance Commission
  2. Financial Sector Legislative Reforms Commission
  3. NITI Aayog
  1. 1 only
  2. 1 & 2 only
  3. 2 & 3 only
  4. All of the above

 
 

 

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