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Govt to auction off 2354 MHz of spectrum worth Rs 5.6 lakh crore

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A total of 2,354.55 megahertz of spectrum in the 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300MHz, and 2500MHz bands will be auctioned by the government on September 29th , which could apparently fetch it Rs 5.6 lakh crore. The government has issued notice inviting applicants (pdf) for prospective bidders through the DoT, and specified a tentative timeline for the auction process. This will be India’s largest telecom spectrum auction.

Note that out of the 2,354.55 MHz of spectrum, a quantum of 197MHz of airwaves in the 1,800 MHz band and 37.5MHz in the 800 MHz band, were released due to spectrum harmonization process conducted in these bands.

Reserve price: The reserve prices for the 2016 auctions is set as per recommendation of TRAI; it had suggested reserve prices of Rs 11,485 crore per MHz for pan India airwaves, including the 700 MHz spectrum, which is being auctioned for the first time. Note that spectrum auctions in 2015 fetched the government Rs 1.09 lakh crore from the sale of 418.05 MHz of spectrum.

Timeline: As per the auction timeline, the last date for submission of application is set on 13th September, following which applicants are reviewed for certain ownership and license compliance. A list of pre-qualified bidders will be issued on 19th September and final list of qualified bidders will be put up on the DoT site by 23rd September. Here is the entire timeline:


Guidelines for applicants

The DoT has also slated specific guidelines, and criteria for both existing telecom operators and new entrants. Any organization that holds a UASL, CMTS, UL license; and any organization that fulfills, or at least provides an undertaking to fulfill the eligibility conditions mentioned in UL License are can participate in the upcoming auctions .Some other notable guidelines and conditions include:

Spectrum Usage Charges: In addition to the total bid amount to be paid, successful bidders will have to pay an additional Spectrum Usage Charges (SUC) of at least 3%, calculated using a weighted average formula on the basis of a telco’s adjusted gross revenue.

Spectrum holding cap: There is a band-wise cap of 50 % of the total spectrum assigned in a spectrum band for a particular service area, and an over-all cap of 25% of the total spectrum assigned in a service across all bands is applicable to selected bidders.

Duration of spectrum: All successful bidders will have the right to use spectrum won for a period of 20 years, effective from the date of assignment of frequency.

Relaxed payment structure: Successful bidders can pay 25% of the bid amount upfront for all bands, and 50% upfront payment in case of 1,800 MHz, 2,100MHz, 2,300MHz and 2,500MHz bands. Rest of the bid amount can be paid after a 2-year moratorium period in 10-year installments. The alternate payment option was initially suggested by TRAI in April.

New Entrants: Existing spectrum holders whose airwaves are due to expire in this year (2017-18) and subsequently does not own anymore spectrum in the expiring service area, will be treated as ‘New Entrants’. Existing telcos, who previously did not have a license to operate in newer service areas, but procured one recently; and those looking to procure a different band of airwaves under existing service areas, are also treated as new entrants.

Net Worth Requirements: All new entrants are required to show a net worth of Rs.100 crore per service area (Rs.50 crores each for J&K and North East), in which the bidder wants to submit bids. However, existing players must show a minimum paid up equity capital equal to one tenth of net worth prescribed by it. In addition, an existing telco with negative net worth but already holds spectrum in any band can bid in 900/1800 MHz bands, but they cannot submit bids in 700 MHz, 800 MHz, 2100 MHz 2300 MHz, or 2500 MHz bands.

Ownership compliance certification: After applicants have submitted applications, the DoT shall publish ownership details of selected or legible applicants by  14th September. After which, the eligle applicant must submit and undertaking conforming that it complies with ownership restrictions as specified in the UL/CMTS/UASL/Basic service license by 16th September. However note that the final list if bidders will be released on 23rd September.

Earnest Money Deposit & bank guarantee: The earnest money in the form of a Bank Guarantee from a Scheduled Bank of the requisite amount needs to be submitted along with the application for prequalification. The Bank Guarantee shall be valid up to 30th April 2017 and extendable for a further period of six months at the request of DoT. In addition, new entrants will have to submit a ‘performance bank guarantee’ of Rs. 35 crore per service area for placing bids in 700 MHz, 800 MHz, 900 MHz and 1800 MHz. While, existing players will have to provide bank guarantee of Rs. 21 crore per service area.

Download: Notice Inviting Applicants for 2016 spectrum auctions

Also Read: Lowdown on Govt approved spectrum trading guidelines


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