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BW Businessworld

A Bundle Of Confusion

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This is the fourth time in five years that spectrum auctions are being conducted in India. But, the confusion around it this time round is immense. Eight private telecom service providers are in the fray to bid for spectrum in the 800/900/1800/2100MHz bands starting 3 March. It was estimated that the auctions would net nearly Rs 100,000 crore, of which Rs 30,000 crore would come in during 2014-15.

But lack of clarity from the Department of Telecommunications (DoT) on the quantum of spectrum that various category of operators can bid for has led telecom operators such as Bharti, Idea Cellular, Sistema Shyam and Reliance Communications to file cases in the high courts of Tripura, Allahabad, Delhi and Karnataka.

The problem is simple. In the north-east, for example, 8.8MHz of spectrum in the 900MHz band is up for bidding. The government had fixed 5MHz as the minimum that can be bid for. That would leave any other bidder with just 3.8MHz. Till now, both operators have 4.4MHz each. The Tripura High Court had allowed Bharti Hexacom and Reliance Telecom to bid for the entire amount of spectrum with them now — 4.4MHz — in the North-east circle, instead of the 5MHz as specified in the Notice Inviting Application (NIA). The two companies claim that out of the 8.8MHz available, a 5MHz bid has the potential to oust competition in the circle for spectrum in the 900MHz band.

These cases have since been moved to the Supreme Court (SC). On 26 February, the SC stated that “the auction as scheduled to be commenced from 3 March 2015 shall continue, but the same shall not be finalised without the leave of this court….In addition, no bidder shall claim equity because of his participation or success in the tendering process”. The next hearing is slated for
26 March.

That leaves bidders at a loose end and raises multiple questions with no clear answers. Can the DoT declare the winners and the price at which they won spectrum in the event of the auction getting over before 26 March? Also, it is unlikely that the SC can come up with a verdict before that date. Do operators have to pay the amount to the government? In case the SC rules in favour of operators, will the government return the money? Most importantly, for operators, it will reveal their bidding strategy if results are made public first and then rules are changed.

This auction is crucial for finance minister Arun Jaitley who has revised the earnings from “other communication services” at Rs 43,161.72 crore for 2014-15. That collection is important for him to stick to the fiscal deficit target of 4.1 per cent this year. Essentially, it is one tricky position that could snowball if issues are not settled.

(This story was published in BW | Businessworld Issue Dated 23-03-2015)