The government doesn’t seem to be very optimistic about getting high receipts from spectrum auctions, including 5G, which it plans to hold later this year. Going by the telecom revenue it expects to garner during the current financial year, auction receipts seem to be around only Rs 30,000 crore, which means in terms of actual upfront payment, it will get only around Rs 10,000 crore.
This will be much lower than revenues of Rs 65,789 crore (upfront payment: Rs 32,434 crore) it got in 2016 auctions and Rs 1.09 lakh crore (upfront payment: Rs 28,872 crore) in 2015.
The expectation is sharply lower than the Telecom Regulatory Authority of India's (Trai) recommended reserve price for about 8,644 MHz of spectrum in different bands at Rs 4.9 lakh crore.
The reason for such modest expectation this time could be because of the high reserve price recommended by Trai as well as the weak financial position of the telecom operators. Further, the number of operators has also shrunk since 2016 and only three private players are left in the market.
In the Union Budget presented on Friday, the overall revenue expectation from the telecom sector was pegged at Rs 50,519 crore.
Though this is higher than Rs 41,519.76 crore pegged in the Interim Budget, the FY19 target, which was fixed at Rs 48,661.41 crore, was missed by Rs 9,416.42 crore, with actual collections coming in at Rs 39,245 crore.
Apart from auction revenues, the receipts from the telecom sector mainly comprise licence fees from operators, spectrum usage charges and deferred instalments from previous auctions.
If one takes the Rs 50,519-crore target fixed in this year's Budget, rough calculations show that a bulk of around `24,000 crore will come from deferred installments from previous auctions. Another around Rs 15,500 crore will come from revenue share licence fee and spectrum usage charge.
This nets around `40,000 crore. This means that auction estimates have been kept around `30,000 crore because 30% of it makes the upfront amount, which will accrue to the government at `10,000 crore. Operators pay 25% and 50% of the total bid amount depending upon the band of spectrum they have won.
The government has acknowledged that telecom operators are going through financial stress and telecom minister Ravi Shankar Prasad has constituted a committee under the department of telecommunications secretary to review the various levies on the sector such as licence fee, spectrum usage charges, etc.
The government has also asked Trai to review the spectrum reserve price because it is seen on the higher side. Trai is yet to respond to the government's request.
In August 2018, Trai had recommended reserve price for the next round of auctions, which were considerably lower than what was fixed for the 2016 auctions but was still seen on the higher end, considering the industry's financial position.
For instance, for the 5G band in the 3300-3600 Mhz where the prices had been given for the first time at Rs 492 crore per Mhz, for a pan-India minimum block of 20 Mhz operators would have to shell out Rs 9,840 crore, which is seen as steep.
Similarly, for the premium 4G spectrum, though Trai had reduced the reserve price by 43% at Rs 6,568 crore per Mhz, still for a pan-India 5 Mhz block, operators would have to shell out Rs 32,840 crore.
Going by global standards, the price of `492 crore per Mhz for the 5G spectrum was seen on the higher side as the South Korean auctions, which happened last year, had the price at Rs 130 crore per Mhz.