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DAILY NEWS ANALYSIS

  • 07 March, 2021

  • 10 Min Read

Spectrum auctions

Spectrum auctions
Introduction

  • India’s first auction of telecommunications spectrum in five years, with the government generating a revenue of ?77,815 crore from the exercise.
  • Reliance Jio accounted for close to 60% of the spectrum bought, followed by Bharti Airtel and Vodafone Idea.
  • On offer was over 2,308 megahertz (MHz) of spectrum valued for the auction by the government at ?3.92 lakh crore, and bids were successfully received for 37% or 855.6 MHz.

How has the industry been since the last auction?

  • Previous participants: The participants then included Tata Teleservices, Idea Cellular, Reliance Jio, Bharti Airtel, Vodafone India, Reliance Communications and Aircel.
  • Consolidation in the Industry: In the last few years, there has been a consolidation in the industry, as a result of which there are only three major players now — Reliance Jio, Bharti Airtel and Vodafone Idea.
  • 2 player structure: An IIFL Securities report last December suggested that Jio and Bharti Airtel are, by increasing their market share, shaping the industry toward “a near two-player structure”.
    • On the other hand, Vodafone Idea, it said, is struggling financially.
  • Financial stress: In recent years, while the user base has grown, the industry itself has witnessed unforeseen financial stress in the form of an important court case against it.
    • The reference is to the Supreme Court verdict which gave telecom companies 10 years to pay their adjusted gross revenue (AGR) dues to the government, with 10% of the dues to be paid by March 31, 2021.
    • Vodafone Idea and Bharti Airtel were the worst-hit by this order.

Why was an auction needed now?

  • All three players needed to renew some of their spectrum as the validity was set to expire later this year.

Spectrum Objectives:

  • To obtain a market-determined price for the spectrum on offer,
  • Ensure efficient use of spectrum and avoid hoarding,
  • Stimulate competition in the sector and maximise revenue proceeds.

What are spectrum auctions?

  • A spectrum auction is a process whereby a government uses an auction system to sell the rights to transmit signals over specific bands of the electromagnetic spectrum and to assign scarce spectrum resources.

Spectrum auctions in India

  • Devices such as cellphones and wireline telephones require signals to connect from one end to another. These signals are carried on airwaves, which must be sent at designated frequencies to avoid any kind of interference.
  • The Union government owns all the publicly available assets within the geographical boundaries of the country, which also include airwaves.
  • These airwaves are called spectrum, which is subdivided into bands which have varying frequencies.
  • All these airwaves are sold for a certain period of time, after which their validity lapses, which is generally set at 20 years.

Wasn’t this for the 5G rollout?

  • No. The government offered spectrum for 4G in the following bands: 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz.

What do these bands stand for?

  • To explain this, we have to begin with the term ‘spectrum’, which, in this context, stands for the portion of the electromagnetic wave range that is suitable for communication purposes.
  • As this is a huge economic resource, which also provides unimaginable benefits to any population, it is controlled by the government.
  • Industry organisation GSMA, a body that represents the interests of mobile operators worldwide, says in its blog that one slice of this spectrum is not the same as another slice.
  • The difference is in terms of the frequency of these waves (the number of times the waves repeat themselves in a second).
  • Spectrum bands have different characteristics, and this makes them suitable for different purposes.
      • Benefits of low frequency: Low-frequency transmissions can travel greater distances before losing their integrity, and they can pass through dense objects more easily.
      • Less data can be transmitted over these radio waves, however. Higher-frequency transmissions carry more data, but are poorer at penetrating obstacles.”
    • In this context, hertz is a measure of the number of cycles per second, and 1 megahertz stands for 1 million hertz.
    • Telecom providers cover their bases by using both low and high-frequency bands.

Who bought what in the auction?

  • Reliance Jio was the biggest spender in the auction. It shelled out ?57,122 crore, just over 60% of which was to acquire spectrum in the 800 MHz band, according to a report by Edelweiss.
  • Bharti Airtel, which dished out ?18,699 crore, spent half of its money on the 800 MHz and 900 MHz bands. It also spent on the 2,100 MHz and 2,300 MHz bands.
  • Vodafone Idea, the report said, “was the most conservative of the lot”. It used almost two-thirds of its ?1,993-crore spend on the 900 MHz band.

Why did the 700 MHz band have no takers?

  • The 700 MHz band, as also 1,800 MHz, 2,100 MHz, and 2,300 MHz bands, are seen playing an important role in the 5G rollout (the fifth generation of mobile networks that promises to connect everybody as also everything much faster and at much lower latency).
  • The 700 MHz band was not expected to find any takers given its prohibitive floor price.
  • ICICI Securities report called the “king” in 5G, the C-band, which is the band between 3,300 MHz and 4,200 MHz, was not on offer in this round of auctions.

Source: TH


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