Column: 2100 ways to win the Budget

Jul 21 2014, 00:04 IST
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SummaryWithout the defence and telecom ministries cooperating, the spectrum auction target simply cannot be met

With BSNL finally issuing orders worth R8,700 crore to work on completing the long-delayed—the MoU for this was signed way back in 2009—optical fibre network for the defence forces, the stage is all set for defence vacating the very large tranches of commercial spectrum they are currently using. While creating the network will still take another 18-24 months, finance minister Arun Jaitley needs to get the defence forces to release some valuable spectrum that, it has to be pointed out, they are not using at the moment, but remains under their control. There is a larger issue of a clean separation of defence and commercial spectrum, but that is not the subject of this column.

This column is about how Jaitley’s targets from spectrum auctions cannot be met unless he gets both the defence—relatively easier, since he is in charge—and telecom ministry to cooperate. Some simple maths makes this clear.

n Since the government gets roughly R18,000 crore a year in terms of spectrum charges, licence fees and microwave charges anyway, Jaitley needs another R27,000 crore from spectrum auctions during the year.

n Since the terms of auctions—assuming they are similar to the ones held last February—require firms to pay a third up-front, get a two-year moratorium, and then pay the rest over 10 years, this means the government needs to auction roughly R81,000 crore worth of spectrum before March 2015.

n A total of 184 MHz of spectrum is coming up for renewal in December 2015 in the 900 MHz band, so needs to be auctioned by this December. If you assume that this spectrum gets auctioned at a price that is 20% higher than what it was sold for in the 2010 auction, this gives the government R26,600 crore. Since a fourth of the 900 MHz bid price has to be paid up-front, the government would get R6,650 crore.

n A total of 104 MHz of spectrum in the 1800 MHz band is with the government and can be auctioned again this year. Since 78 MHz of this is left over from the February auction, presumably this means telcos don’t really want this—much of this spectrum is fragmented and is fine for voice traffic, but for data traffic which is the one really growing, telcos need at least 5 MHz of contiguous spectrum. But, to be optimistic, assume all of this gets bought at the February price, that’s R8,250 crore the government gets,

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