What happened in the Spectrum Auction 2016?

The spectrum auction created a huge buzz among the leading telecos of the country and everyone was eager to see who wins the race.

A Backward Glimpse

This auction needs to be seen in the backdrop of the auction of 2015. In that one, the centre raised Rs 1,09,874 crores. Only 11 per cent of the spectrum, across the band 800MHz, 900MHz, 1800MHz and 2100MHz bands were unsold.

Yet, the 2015 auction was a question of survival for some telcos whose 20-year licences were coming to an end.

What do the results Show?

The centre managed to raise just around Rs 66,000 crores from the sale of 965 MHz of spectrum.

It is not clear if the word auction suits the process in which the Department of Telecommunications (DoT) sold spectrum. Only 11 out of a total of 126 Circle-Band combinations on offer saw even a semblance of competition among participants. In the remaining 115 Circle-Band, any sale that happened took place at the reserve price.

Within one band, there were different blocks of spectrum that were up on the block for bidding, and these blocks were treated as if they were identical.

In each round of the bidding process, telcos had to indicate their interest in purchasing a certain number of blocks of spectrum in a certain band at the price that had been fixed for the round (prices varied by circle as well as by band). Depending upon the equation of demand-supply, prices would either remain the same or increase in each round.

The Winner

Vodafone won the race taking home the Spectrum over Rs 20,000 crores while the data about the quantum it bought is not available.

On the other hand, Bharti Airtel bought 173.8 MHz spectrum worth Rs. 14,244 crores across the bands of 1,800 MHz, 2,100 MHz as well as 2,300 MHz bands. The Company has further strengthened the Pan-India spectrum portfolio, fulfilling its requirement for the next 20 years. Bharti Airtel now has 3G as well as 4G spectrum in all circles which is the widest mobile footprints across the country.

Reliance Jio acquired the rights to use the spectrum of 269.2 MHz across the 800 MHz, 1800 MHz along with 2300 MHz bands worth Rs 13,673 crores across all 22 service areas.

Idea Cellular has acquired the spectrum of 349.20 MHz aggregating to a total of Rs 12,798 crores, securing a Pan-India wireless broadband footprint across the country. The teleco giant is aiming to expand its wireless broadband presence like never before, mainly in 4G LTE technology in the Country.

Tata Teleservices bought the spectrum worth over Rs 4,000 crores while quantum of the spectrum is yet unknown.

With this auction over, it will be interesting to see how the Department of Telecommunications adapts for the next one. Slashing reserve prices significantly might be an admission that the government got it wrong in setting prices too high this time, while not doing the same might result in another failed auction in 2016.

This gives rise to the legitimate concern that DoT, on account of this failed spectrum auction, might put off indefinitely the next one, until market conditions have changed sufficiently for the current reserve prices to make any sense.