While the government must surely be pleased with its haul of over Rs 52,000 crore — till Thursday evening — from the ongoing spectrum auctions, for telcos it might just turn out to be a ‘winner’s curse’ given the aggressive bidding.
In the 900MHz band, for instance, where a total of 46 MHz is up for grabs in Delhi, Mumbai and Kolkata, the bid price of Rs 21,935 crore is higher by a whopping 71.9% over the reserve price. And given the telcom industry’s total adjusted AGR is all of Rs 140,000 crore, an outflow of Rs 52,000 crore will surely pinch. What must be worrying telcos is that as more licences expire starting 2016-17, the government will be reluctant to reduce the reserve price.
For perspective, the government earned Rs 67,000 crore from the 3G auctions in mid-2010; while the bidding lasted for more than a month, Rs 52,000 crore was earned in just four days. This time around, there has been little action in the 1800 MHz band where 385 MHz of spectrum is on sale, and the total bid price at R30,729 crore is up 6.5% over the reserve price. But the 900 MHz space has seen a price war that could be unsettling for some players. The bid price for 16 MHz in the Mumbai circle of R9,009 crore, for example, is higher than the industry’s total adjusted gross revenue of R5,636crore for the circle. It’s not too different in Delhi where the bid price stood at R10,228 crore compared with the industry’s AGR of R6,637crore.
Rahul Khullar, chairman, Telecom Regulatory Authority of India, stops short of calling the bids in the 900 MHz band a winner’s curse, saying prices in the 900 MHz band have cooled now and that attention has shifted to the 1800 MHz band. “This is a good sign because people are looking at a viable option to the 900 MHz band,” Khullar said.
Khullar disagrees that industry has overbid in the 900 MHz space as it did for 2.1 GHz in 2010. “Valuation depends on individual perspective. The cost has to be seen over a 20-year horizon as the licence is being renewed for that period and going by that it is not very high,” the Trai chairman said.
Sanjay Kapoor, former CEO of India and South Asia, Bharti Airtel, however believes any price paid beyond a point becomes a winner’s curse.