Positive outcome

There are some important and positive takeaways from the successful completion of the auctioning of spectrum in the 900 MHz band and the 1800 MHz band. The 10-day-long intense bidding saw better results than the two earlier rounds of 2012 and 2013. A good Rs 61,162 crore was netted, of which 30 per cent will be paid upfront by telecom companies and will come immediately into the cash-strapped exchequer, easing the deficit burden. The returns are much above the reserve price and more than expected. This was mainly because the licences of some important telecom companies are going to expire soon and they had to secure spectrum at any price to continue in business. The entry of new strong players like Reliance Jio also increased competition and pushed up the prices.  So the conditions for the best discovery of prices were available.

There is a view, and there are complaints from telecom companies which are weighed down by debt, that they will find it difficult  to meet the additional cash demand made on them. But they willingly bid in a transparent market  governed by clear rules,  and the difference from the arbitrary allocation of spectrum and licences by the then minister A Raja during  2007-08 is there to see. The administrative decision had only brought about Rs 9,200 crore to the exchequer. The present successful auction is a vindication of the views expressed by the Comptroller and Auditor-General and the decision of the Supreme Court on the utilisation of natural resources. The court had cancelled wrongly procured licences and directed that scarce natural resources should be auctioned. The principle holds good in other areas like coalfield allocations also.

In the short term operators may see some pressure providing for the immediate cash outgo. But they have licences and enough spectrum to offer services for the next 20 years. The bulk of the bid amount needs to be paid to the government only in equated instalments over 10  years. That is not a bad deal. Many have seen the possibility of operators raising tariffs across the board to recover costs. But competition will prevent runaway increase in prices. Telecom companies will have to find appropriate strategies like offering different services at different prices in accordance with demand and value chain. This has happened in mature markets. The Indian market has much more scope to expand both in quantity and quality.

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