Spectrum auction won’t fetch more than Rs80,000 cr: HSBC

The government may not garner more than Rs80,000 crore from the upcoming spectrum auction due to stressed balance sheets of telecom operators and lack of ecosystem to cash in on premium airwaves in the 700 Mhz band, an analysis by HSBC Global Research shows.

''Our initial analysis suggests that total proceeds from spectrum auction are unlikely to exceed $10-12 billion (about Rs80,000 crore) and we believe a lot of spectrum might remain unsold in the 700, 2300, 2500 MHz bands. We see good demand for 1800 MHz, selective demand for 2100 and 700 Mhz bands,'' the report said. In the last auction, the government had received bids worth Rs1.1 lakh crore.

The telecom sector is staring at a debt load of close to Rs3 lakh crore. Leading operators have sought deferring the sale of 700 MHz spectrum, saying the ecosystem for providing services in this band is not developed and would lead to underutilisation of the spectrum for several years, blocking funds.

''Further, ecosystem for 700 MHz band from an Indian context could be at least 3-4 years away. To sum up, we see limited and selective demand for spectrum in 700 MHz band,'' the report noted.

The government hopes to raise $83 billion (about Rs5.56 lakh crore) from the upcoming spectrum auction, which will be potentially 2.8 times current revenues from the sector with an average net and debt Ebitda ratio of 4 times, the report said.

''Total spectrum to be sold in the upcoming auction exceeds 2,200 MHz, which is significantly above historical amounts sold and we don't see a case for it,'' it added.

The cabinet on Wednesday approved the mega spectrum auction plan, in which airwaves worth Rs5.66 lakh crore for mobile services will be put up for auction. (See: Cabinet clears mega spectrum auction to fetch Rs5.6 lakh crore). In the bidding, all airwaves available with the government for mobile services at present will be auctioned. It includes airwave frequencies in 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz.

The Telecom Regulatory Authority of India had recommended a pan-India reserve price of Rs11,485 crore for 700 MHz, Rs5,819 crore for 800 MHz, Rs3,341 crore for 900 MHz, Rs2,873 crore for 1800 MHz, Rs3,746 crore for 2100 MHz, and Rs817 crore each for 2300 MHz and 2500 MHz bands.

The premium 700 Mhz band worth Rs4 lakh crore is to be auctioned at a reserve or base price of Rs11,485 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, which is used for providing 3G services.

''The 700 MHz spectrum in high subscriber density/large coverage markets like Bihar, UP, Rajasthan and West Bengal is cheaper than 900 MHz and incumbent telcos have the option to add 700 MHz spectrum selectively,'' the report said.