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Small comfort from spectrum cash

New Delhi, Dec. 16: The government is likely to earn around Rs 13,330 crore from the sale of spectrum this fiscal (2012-13) if the response to bidding remains subdued and operators choose to pay in instalments.

In the November auction of spectrum in the 1,800 megahertz (MHz) band, the government could earn only Rs 1,706.9 crore, with operators deciding to pay in instalments.

The government is betting on non-tax revenues to bridge part of its fiscal deficit, which is targeted to be capped at 5.3 per cent of the gross domestic product (GDP) in 2012-13.

The upcoming auctions in the 1,800MHz band for four circles — Delhi, Mumbai, Karnataka and Rajasthan — may fetch Rs 9,904.8 crore if all the eight blocks of 1.25 MHz each find takers. A 33 per cent upfront payment will fetch Rs 3,268.6 crore to the government. The auctions will be held by March.

However, Rajasthan does not have spectrum on sale in all its districts and may see poor interest.

According to officials of the department of telecom (DoT), spectrum is not available in 11 districts in Rajasthan — Bikaner, Barmer, Bharatpur, Dausa, Ganganagar, Hanumangarh, Jodhpur, Jaipur, Jaisalmer, Jalore and Sirohi.

“Since the reserve price was too high, even 30 per cent reduction is unlikely to motivate incumbents to bid for these circles aggressively. However, there may be some slots, if any, taken by incumbents as they might be in need of additional spectrum to decongest their networks,” said Hemant Joshi, partner, Deloitte Haskins & Sells.

The auction of the more efficient 900MHz spectrum in the Delhi, Mumbai and Calcutta circles may generate better interest among operators. However, industry players and analysts do not expect bids to rise much higher than the current base price as operators will have to pay market determined prices to retain 2.5MHz of the 900MHz spectrum at the time of licence renewals.

Calculations suggest that by selling 12 slots of 1.25MHz each in the 900MHz band, the government may earn Rs 23,040 crore from the Delhi and Mumbai circles. Together with Rs 2,274 crore from the Calcutta circle, where 10 slots are on sale, the total revenue generated will be Rs 25,314 crore.

However, payments may not be more than Rs 8,353.6 crore this fiscal as operators, burdened by high debt and lower revenues, may take the deferred payment route to keep cash outflow at a minimum, said analysts.

The aggregate collections from the November and the upcoming auctions, therefore, come to around Rs 13,330 crore.

Telecom secretary R. Chandrashekhar is optimistic about raising Rs 20,000 crore from the sale of spectrum in the March auctions.

In the November auctions, the final bids for each circle did not climb higher than the base rates. Moreover, two operators — Idea and Videocon — that sought adjustments against the entry fee paid in 2008 (for licences that were quashed following a Supreme Court order) would pay unadjusted fees only after two years.

Under the deferred payment scheme, winning bidders pay only 33 per cent upfront and get a two-year moratorium to pay the balance in 10 equal instalments at 9.75 per cent annual interest.

While some players are interested in bidding for spectrum in the upcoming auctions, they want the base price to be lowered further. The government recently slashed base prices by 30 per cent.

Jon Fredrik Baksaas, CEO of Norwegian operator Telenor, feels that prices will have to be further reduced.

 
 
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