India Sets Sights on $12 Billion Mobile Spectrum Auction

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In an ambitious move, the Indian government has announced its plans to hold a mobile spectrum auction in May, eyeing a starting bid of nearly US$12 billion. Despite the high hopes tied to this event, experts remain skeptical about its success, given the tepid interest expected from the country’s telecom operators.

Scheduled to commence on May 20, the auction will offer a substantial 10,523.15 MHz of spectrum across eight different bands, with the Department of Telecommunications (DoT) setting the stage for potential bidders to apply by April 22. The total reserve price is pegged at 963.18 billion rupees (approximately US$11.64 billion), as stated in a comprehensive document released by the DoT, which also outlines the auction’s structure, eligibility criteria, and the spectrum licensing terms for a 20-year period.

Interestingly, the auction comes without ongoing spectrum usage fees, allowing winners the option to pay in yearly installments over the two-decade span at an interest rate of 8.65%. This move, part of a broader government initiative to offer telecom service providers regular opportunities to purchase spectrum transparently, has been praised by Communications Minister Ashwini Vaishnaw as a significant reform.

However, the enthusiasm from telecom operators might not match the government’s optimism. Following a substantial investment in 5G spectrum in August 2022, which netted the government over 1.5 trillion rupees, major players like Reliance Jio Infocomm are expected to be cautious. Analysts from Axis Capital suggest that Jio, despite its financial heft, along with Bharti Airtel, which has already made considerable strides in 5G infrastructure, may limit their spending due to the still nascent 5G market penetration and network utilization.

Bharti Airtel and Vodafone Idea are anticipated to participate, driven by the need to renew their existing spectrum licenses. Axis Capital estimates Airtel’s investment at around 38 billion rupees (US$460 million), with Vodafone Idea likely investing 25 billion rupees. These projections, however, fall short of reaching the government’s ambitious reserve price, casting doubts on the auction’s ability to significantly boost state revenue.

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