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Telecom Department Eyes Reverse Auction To Meet Fiscal Needs

The Department of Telecommunications (DoT) is considering a reverse auction model to ensure that the government is able to raise timely money from sale of bandwidth for meeting fiscal needs without further adding to the financial stress of mobile phone operators.

“The industry is divided; some operators want airwaves at current price, rest want it either at a reduced price or don’t want an auction right now,” a senior DoT official told ET. “Under the reverse auction model, one could put up all bands for auctions. The bandwidth which doesn’t elicit any response will automatically see a cut, say of 10% in the reserve price. This can once again be repeated till we hit a floor cap, say of 25% below the reserve price, after which we pull the particular bandwidth out of the auction and continue to sell the rest,” the official added

As reported earlier by ET, new entrant Reliance Jio Infocomm has backed an auction of both 4G and 5G airwaves in the current fiscal year at the prices recommended by the sector regulator, Telecom Regulatory Authority of India. Second largest telco Bharti Airtel NSE -1.46 % , however, is keen on a sale of only 4G airwaves in the current fiscal year and has sought a reduction in the price of sub 1GH bands.

Market leader Vodafone Idea doesn’t want auctions till 2020. Its chairman, Kumar Mangalam Birla, has recently told top finance and telecom ministry officials that the severe liquidity crunch it was facing may force the telco to default on a Rs 900 crore spectrumrelated charge it must pay the government in March.

This has nudged the government to consider some relief measures for the sector at large, with telecom and finance ministry officials having discussed Birla’s proposals that the period of payment for spectrum purchases be increased to 18 years from the current 16, extending the two-year moratorium to three, besides spreading the payment of Vodafone Idea’s Rs 900 crore into 12 instalments.

Birla also flagged high levies in the telecom sector — nearly a third of a telco’s revenue goes to the government in the form of different levies — and the recent hike in import duty of telecom equipment apart from the Rs 30,000 crore that is locked up on account of GST payment under the ‘reverse charge mechanism’.

“The way out of such a problem is to not only ease the stress on the sector but to also ensure it grows which will help to revive the sector faster. Thus, the auctions must be whatever bandwidth it has.

“See, all players want different things, we want to ensure that we sell bandwidth on time and of course at prices which are not exorbitant for the sector, and that is why we are now considering the reverse auction model,” the official said, adding that the petroleum ministry is currently following the model.

“This way, we don’t lose value of the precious spectrum lying with us and whosoever wishes to buy or needs more bandwidth can buy. If any bandwidth fails to generate demand after it hits the floor price also, then we put it up for auction next year,” the official added. – The Economic Times

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