Government sets an unrealistic licence target for auction

Government sets an unrealistic licence target for auction

The government’s ambitious plan to generate $2 billion from the auction of much-awaited next generation frequency spectrum (3G/4G) licences is unlikely to materialize because cellular companies are not interested in offering such high bids.

According to sources, a lower base price for the auction had been reserved earlier and mobile phone operators are seeking a rational license fee.

A former member (telecom) of MoITT, said:
[pull_quote_center]Instead of declaring that it would generate the “unrealistic” amount of $2bn from the auction, the government should focus on ensuring transparency in the process. It is unprofessional on the part of a minister to declare the ambitious amount from the sale of the licenses. He should better ensure that the consultants hired for the process should address the concerns of all stakeholders before submitting their report to the cabinet.[/pull_quote_center]

Setting a realistic reserve price was complex but essential to ensure that it reflected the socio-economic value of the spectrum and not just a “desire to maximise tax revenues”. Prices should be passed on in accordance with local market conditions.

International benchmarks are useful but local conditions are more important. High reserve prices can result in a limited spectrum take-up. In India last year, the auction attracted just one bidder. Similarly, in the Czech Republic, the regulator suspended the auction when bidding went too far above the reserve price, realizing that consumers would suffer from high costs and low quality services at the end of the day.

The operators believe that the next generation networks are expected to add up to Rs 380bn to the GDP by 2020 and up to Rs 23b in tax revenues owing to the economic stimulus. At least 900,000 jobs will also be created in the agriculture, industry and services sectors by 2018 if the spectrum is released this year, they say.

In addition to acquisition of the spectrum, the operators will have to significantly invest in network infrastructure.
While there are five operators — Mobilink, Ufone, Telenor, Warid and Zong — functioning in the country, the government has offered only three licences.