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Govt received Rs 32434.10 Cr in upfront payments from telcos for 2016 auctions

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The Indian government has received Rs 32434.10 crore in upfront payments from telcos who took part in this year’s spectrum auctions, minister of communication Manjoj Sinha said in written reply in Rajya Sabha. The upfront payment structure proposed by TRAI allows telcos to pay a part of the final bid upfront, while the rest of the amount is paid over 18 years with 18 equal annual installments, along with interest.

Note that the government has already received Rs 14,653.07 crore by way of Earnest Money Deposits (EMD)—a mandatory Bank Guarantee from a Scheduled Bank for the purpose of pre-qualification—and from application fees from 7 different telcos prior to auctions.

For 2016 auctions, the government sold waves worth Rs 65789.12 crore, Sinha added in his reply. The Department of Telecommunications originally projected an upfront revenue of Rs 34586.00, which is Rs 2,151 crore less than what was collected in form of upfront payments. The finance ministry on the other hand had higher expectations of Rs. 63580.92 Cr in upfront payments from telcos. However, it is evident that almost all telcos have stuck to upfront payment method.

Although the 2016 auctions were dubbed as the largest spectrum auctions ever, around 59.03% or 1389.95MHz of spectrum remained unsold out of the total 2354.75 MHz which was put up for bids. The premium 700 MHz and 900 MHz saw no takers for this year’s auction due to high prices. Telcos like Airtel, Telenor and brokerage firms including Credit Suisse had red-signaled the high-pricing stating that the reserve prices were “too expensive”. Credit Suisse pointed out that about 71% of the value of spectrum put up for sale was in the 700MHz band.

What the govt thinks about non-sale of 700 MHz band & call drops

Minister Manoj Sinha represting the communication ministry however presented a different point of view, when asked why the 700 MHz band had no takers for this year’s auctions:

“Absence of ecosystem in 700 MHz band including the non-availability of devices together with industry perception of high reserve price appear to be the main reason for no bids in the 700 MHz band. In addition, companies appeared to be preserving cash to protect market share in the days to come,” Sinha said in his reply.

Sinha also pointed out that “spectrum shortage cannot be a reason for call drop after recent spectrum auction.” He added that call drops was apparently an “international phenomenon and cannot be eliminated completely.”

Also Read: What the telcos, stakeholders & others are saying about 2016 spectrum auctions 

Copy of minister Manoj Sinha’s reply in Rajya Sabha:
upfront-payment-telcos

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