Timely auction may pay off
The government’s estimate of raising Rs 40,000 crore from auction of spectrum in the next financial year could be surpassed if the department of telecommunications (DoT) sticks to its auction deadline. And, if incumbent operators do not go to court.
The auction of BWA spectrum is expected to happen by December, while auction of 2G spectrum after the cancellation of licences, by a Supreme Court order, is likely to end by early-March 2013. However, even a slight delay would upset the plans of the finance ministry, which is banking heavily on the auction money to reduce the fiscal deficit. The head of telecom practice at KPMG, Romal Shetty, said: “Seeing the market conditions and the financial health of telecom companies… it is difficult (to say) that the prices of spectrum will come anywhere close to prices discovered in 3G auction in 2010 (about Rs 16,000 crore for a pan-India 3G licence).But, from all three — 2G auction, BWA auction and pricing of excess spectrum beyond 6.2MHz — the government may garner more than the target of Rs 40,000 crore.”
According to industry experts, the auction of 2G spectrum (from cancelled licences) may bring in Rs 15,000-Rs 20,000 crore, while BWA auction (of three blocks) may garner Rs 25,000-Rs 30,000 crore. If the government decides to charge retrospectively for holding spectrum beyond 6.2MHz, it is expected to earn about Rs 23,000 crore from the telecom operators.
However, incumbents such as Bharti, Vodafone and Idea are likely to challenge the pricing of spectrum in telecom tribunal TDSAT. And, there is no surety that this money will come into the coffers. The government might also be forced to pay back over Rs 6,000 crore to the cancelled licencees as it is clear they will go to court for refund of licence fees.
A senior DoT official said they would be under pressure from the finance ministry now to conduct auctions well in time as it would have a direct impact on fiscal deficit. An industry expert tracking the sector for the past 15 years said given the experience of 3G and BWA auction, which were delayed by about two years, DoT needs to tread cautiously on meeting deadlines if auction revenues have to be accounted in 2012-13.
He also said the target of Rs 40,000 crore has been a conservative one and the income will exceed expectations.
Communications and IT minister Kapil Sibal had recently said the government will auction BWA spectrum by December.
State-run telecom firm BSNL has offered to return its wireless broadband spectrum in several telecoms zones.
There is also a plan to auction 4G spectrum in the 700 mega hertz band, which will be vacated by the information and broadcasting ministry.
However, from the cancelled licences, according to a Supreme Court order, only Norway’s Telenor and Russia’s Sistema have shown interest in participating in the 2G auction. Etisalat and Bahrain Telecom have already announced their plans of exiting India following the Supreme Court order. Loop and Videocon were among the other new players who had got new licences in January 2008 by then telecom minister A Raja, who is under judicial custody for alleged 2G spectrum scam.
So the new players, who are not likely to participate in the auction will ask for a refund from the government. A cost of pan-India licence cost Rs 1,651 crore to the new players. The government might have to shell out Rs 5,000-6,000 crore in case of refunds.
On February 2, the apex court had ordered cancellation of 122 licences issued in January 2008 and asked the government to auction the released spectrum in four months. But DoT has filed a clarificatory petition saying that the auction can only be completed in 400 days.
The government had collected over Rs 1 lakh crore from auction of 3G and BWA spectrum in 2010, which was way beyond the set target of Rs 35,000 crore.