About spectrum auction: Dialling right – Government should ensure that exchequer and the public benefit from spectrum sale

Source: The post is based on the article “Dialling right – Government should ensure that exchequer and the public benefit from spectrum sale” published in The Hindu on 5^th August 2022.

Syllabus: GS 3 – Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Relevance: About India’s spectrum auction.

News: India’s latest auction of telecommunications spectrum drew bids exceeding a record ₹1.5 lakh crore in a clear sign that the industry is on the path to recovery.

About the present Spectrum auction

The government has netted just over a third of the ₹4.3 lakh crore reserve price it had set for the spectrum on offer. 71% of the airwaves on the block won bids is a testament to the improvement in the industry’s health.

Reliance Jio emerged as the top bidder cornering 48% of the airwaves. Bharti Airtel bid just under half that amount for 39%. The debt-laden Vodafone Idea cornered about a 12% spectrum.

What were the recent steps that help to improve the telecom sector?

Government steps: The Centre last year eased the regulatory norms around the payment of dues. This includes a four-year moratorium on outstanding payments and the redefinition of adjusted gross revenues to prospectively exclude non-telecom earnings.

The Government’s policy decision to return bank guarantees to telcos helped them to improve their eligibility for debt and increased capital expenditure.

Steps taken by industry: Industry increased tariffs which helped them to lift the average revenue per user at the telecom service providers. Thereby boosting margins.

All this allowed service providers to attract investor interest and spread liabilities over a staggered period.

What are the lessons that should be learned from spectrum auction?

The high reserve price has dampened enthusiasm for certain spectrum bands. For instance, 3.3 GHz and 26 GHz were bid at the reserve price in several service areas, the 600 MHz was left untouched, and 60% of the 700 MHz spectrum remained unsold.

Note: The 700MHz spectrum is ideal for rural connectivity as well as signal penetration inside buildings in urban areas.

Hence, the government should price the spectrum in an optimal manner to ensure that both the exchequer and the public at large, including in remote rural corners, benefit from it.