Cabinet approves Rs 5.66 lakh cr mega spectrum auction plan

The auction will help operators augment expansion of high-speed 4G voice and data services in the world's second largest mobile phone market.

Gearing up for the biggest auction of mobile phone radiowaves in the country, government on Wednesday cleared sale of spectrum in seven frequencies estimated to be worth about Rs 5.6 lakh crore.

The auction will help operators augment expansion of high-speed 4G voice and data services in the world's second largest mobile phone market by users after China.

"This may be the largest ever auction in history of the country. It has been approved," Finance Minister Arun Jaitley told reporters after the meeting of the Cabinet headed by Prime Minister Narendra Modi.

He however did not give timelines for the auction. Spectrum will be sold in the following bands: 700 Mhz, 800 Mhz, 900 Mhz, 1800 Mhz, 2100 Mhz, 2300 Mhz and 2500 MHz.

Jaitley said the government has decided to refer back to the sectoral regulator TRAI the issue of spectrum usage charge (SUC) paid by operators.

The Telecom Regulatory Authority of India (TRAI) had proposed a 3 per cent of annual revenue of operators as SUC, a recommendation that inter-ministerial panel Telecom Commission also backed.

However, the government's chief law officer Mukul Rohatgi opined against hiking SUC for broadband wireless access (BWA) providers such as Mukesh Ambani's Reliance Jio Infocomm from the current 1 per cent.

Jaitley said opinion of TRAI will be taken again as AG opinion came later. Sources said TRAI is likely to give its recommendation in one month.

In the upcoming auction, more than 2,300 MHz of airwaves will be on the block for telecom operators in seven bands -- 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz.

Of the Rs 5.66 lakh crore expected from the auction, the government would get Rs 64,000 crore this fiscal as part of staggered payment schedule. Another Rs 98,995 crore would come from various levies and services in the telecom sector.

The government had got Rs 1.1 lakh crore from sale of spectrum in March 2015.

Lock-in period for trading in spectrum won under the auction has been reduced to 1 year from 3 years at present, a move that will encourage consolidation in the telecom industry.

TRAI had recommended a pan-India reserve price of Rs 2,873 crore for spectrum in 1,800 MHz band; Rs 3,341 crore for 900 MHz; Rs 5,819 crore for 800 MHz; Rs 3,746 crore for 2,100 MHz; Rs 11,485 crore for 700 MHz and Rs 817 crore each for 2,300 MHz and 2,500 MHz bands.

"The appetite for India's telecom sector is very big," Communications and IT Minister Ravi Shankar Prasad said when asked if such a large auction will evoke the kind of interest which the government is hoping for.

Trai has recommended SUC at a uniform rate of 3 per cent across the industry and gradually bringing it to 1 per cent.

The premium 700 Mhz band is to be auctioned at a reserve or base price of Rs 11,485 crore per Mhz. The cost of delivering mobile services in this band is estimated to be around 70 per cent lower than 2100 Mhz band, used for providing 3G services.

A company interested in buying spectrum in 700 Mhz band will need to shell out a minimum of Rs 57,425 crore for a block of 5 Mhz on pan-India basis. This band alone has the potential to fetch bids worth over Rs 4 lakh crore.

The total potential revenue of Rs 5.66 lakh crore from the spectrum sale is more than double of telecom services industry gross revenue of Rs 2.54 lakh crore reported in 2014-15.