What are the Spectrum Auctions?
The government is selling certain cellular frequencies to mobile phone companies. Eight companies like Idea Cellular, Bharti Airtel, Vodafone India, Reliance Communications and Reliance Gio will bid against each other for the right to operate in the four frequency bands of 800 MHz, 900 MHz, 1800 MHz and 2100 megahertz.
How much money is the government expected to raise?
By Tuesday - the 6th day - the e-auction had already raised Rs 94,000 crore. The government’s initially had a target of around Rs 650 billion rupee for the two-week auction. This has already been surpassed and the final figure is expected to be much higher.
Why are mobile phone companies paying so much?
Because for them it is a matter of survival. Without the license, they will lose their slice of the airwaves, allocated 20 years back. This would mean either shutting shop (which is unlikely) or shifting to another spectrum band. Moving to a different band will require fresh investments, pushing up the mobile operators cost of doing business considerably.
Idea Cellular, has the largest number of telecom circle licenses coming up for renewal, followed by Vodafone and Bharti Airtel. Mukesh Ambani’s Reliance Jio is using this opportunity to establish its footprint.
Which are the spectrum bands most in demand?
Interest is highest in the 900 Mhz band. Most of the large providers operate in this space. Retaining this band (even if it means paying considerably for the license) makes complete economic sense for them. Technically lower bands ‘propagate’ signals more efficiently resulting in a higher quality of voice and data quality. The 2,100 MHz band is getting the least attention.
What is the controversy?
In 2012, the Supreme Court cancelled 122 licenses awarded to 9 companies. Accused of corruption, the government was asked to auction the spectrum, the license cancellation freed up. The two subsequent auctions in November 2012 and March 2013 were a failure, with many companies put off by the high reserve prices. This time the government lowered reserve prices and looks all set to reap the bounty.
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