India Preps for Mega Spectrum Auction in September

India's government has approved plans for a September sale of nearly 2.3GHz of spectrum covering various frequency bands.

This is believed to be the largest-ever spectrum auction in the country and includes the auction of a pan-India 700MHz license for the first time, as well as frequencies in the 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz and 2500MHz bands. The auction could fetch the government as much as 5.6 trillion Indian rupees ($82.4 billion) -- way in excess of the INR1.09 trillion ($16 billion) raised in the last spectrum auction.

Even so, there are some doubts this year's auction will garner quite so much. Operators have already complained about the high base prices set during frequency sales, while recent reports suggest the response to the auction could be somewhat muted.

The 700MHz spectrum, which is believed to be more spectrally efficient, has been priced at INR114.9 billion ($1.7 billion) per MHz. This has led to protests within the industry, with service providers arguing that spectrum fees are not appropriately aligned with ecosystem costs. Operators have even asked the government to delay the auction of 700MHz spectrum.

"Our initial analysis suggests that total proceeds from the spectrum auction are unlikely to exceed $10-12 billion and we believe a lot of spectrum might remain unsold in the 700MHz, 2300MHz and 2500MHz bands," says a report from HSBC Global Research. "We see good demand for 1800MHz, and selective demand for the 2100MHz and 700MHz bands."

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The government has cleared a reserve price of INR58.1 million ($860,000) for 800MHz, INR33.4 million ($500,000) for 900MHz, INR28.7 million ($430,000) for 1800MHz, INR37.4 million ($560,000) for 2100MHz and INR8.1 million ($120,000) for 2300MHz and 2500MHz.

Given existing levels of debt, and the slow take-up of data services in recent years, the high base pricing could make it difficult for operators to acquire more spectrum. Overall industry debts had risen to about INR3.8 trillion ($56.3 billion) at the end of 2015.

The Cellular Operators Association of India has issued a warning that operators might not develop any appetite for 700MHz-based deployments unless prices are reduced. That could drive operators towards the less spectrally efficient 1800MHz, 2100MHz and 2300MHz frequency bands as they expand their 3G and 4G networks.

— Gagandeep Kaur, contributing editor, special to Light Reading

[email protected] 7/5/2016 | 5:56:14 AM
Pricing is out of control.... The gains from the initial 4G spectrum auction a few years ago appear to have upped the greed factor.... this looks like it could be disastrous. WHo has the capital to spend further billions on spectrum and then build and run a network in a country with very tight service margins?

This looks like it will polarize the sector and play to the advantge of Reliance Jio, Bharti Airtel and Vodafone -- but at what cost?
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