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Cabinet clears mega-spectrum auction plan, bidding likely from Sep 1

The Union Cabinet today approved the mega-spectrum auction plan which is estimated to fetch about Rs 5.66 lakh crore to the exchequer.

“Yes, spectrum auction proposal has been cleared,” an official source said.

Government expects to raise at least Rs 64,000 crore from the auction of about 2300 Mhz of spectrum and Rs 98,995 crore from various levies and services in the telecom sector.

According to sources, the main document of auction, notice inviting application, is likely to be issued by July 1, followed by pre-bid conference on July 6. The bidding is expected from September 1. The plans are yet to be confirmed officially.

As per the rules approved by an inter-ministerial panel, the auction would include sale of most premium 700 Mhz band at a reserve price of Rs 11,485 crore per Mhz. The cost of delivering mobile services in this band is estimated to be around 70 per cent lower than 2100 Mhz band, used for providing 3G services.

A company interested in buying spectrum in 700 Mhz band will need to shell out a minimum of Rs 57,425 crore for a block of 5 Mhz on pan-India basis. This band alone has the potential to fetch bids worth over Rs 4 lakh crore.

The total potential revenue of Rs 5.66 lakh crore from the spectrum sale is more than double of telecom services industry gross revenue of Rs 2.54 lakh crore reported in 2014-15.

Leading operators have sought deferring the sale of 700 MHz spectrum, saying that ecosystem for providing services in this band is not developed and would lead to under utilization of the spectrum for several years, blocking industry’s funds.

The panel has also suggested stringent payment conditions compared to liberal method suggested by Telecom Regulatory Authority of India (Trai).

The panel has favoured that companies winning spectrum in higher frequency bands — above 1 Ghz like 1800 Mhz, 2100 Mhz, 2300 Mhz — should make 50 per cent upfront payment and the rest in ten years after a 2-year moratorium. In earlier auctions, companies were given option to make 33 per cent upfront payment.

For spectrum below 1 Ghz band such as 700 Mhz, 800 Mhz, 900 Mhz, companies will require to pay 25 per cent upfront and rest in ten years after a 2-year moratorium. It is in line with practice of earlier auctions but differs from Trai suggestion.

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