The recently concluded spectrum auction has failed to live up to government expectations. The auction lasted for just five days and witnessed participation from only seven out of 11 telecom operators, with only 40 per cent of the bandwidth on offer being sold and no takers for spectrum in the coveted 700 MHz and 900 MHz bands.
This is despite the government making some compelling policy moves. For instance, all of the spectrum available with the government was put on sale, the payment terms were modified, and spectrum was allowed to be used as collateral while seeking loans from banks.
All the policy adjustments notwithstanding, the unrealistic base prices turned out to be a big dampener for the much-publicised spectrum auction. The government could only raise Rs 657.89 billion, a dismal 12 per cent of the total base price.
The subdued response has not only brought in lower revenues for the national exchequer, but is likely to have a detrimental impact on the industry. By passing up on the expensive 700 MHz band, operators will continue to face challenges in providing connectivity in rural areas. The poor show in other bands too will mean that the industry’s struggle with poor quality services and call drops is not over yet.
At a broader level, the tepid response to this auction may stump growth on the Digital India front too. The industry is in urgent need of bolstering its spectrum holding in order to enhance coverage and improve service quality to meet the objectives of the government’s ambitious programme.
In all likelihood, the unsold airwaves will come up for sale again soon. But unless a price correction is considered, the debt-laden operators may choose to limit their bids, thus undermining the government’s ambition of digitally empowering every citizen.