Vodafone Idea: Spectrum sale may fetch only Rs 10,000 crore initial payment

MUMBAI: The authorities could generate upfront funds of solely round Rs 10,000 crore from spectrum auctions within the subsequent fiscal yr beginning April 1, given the monetary challenges confronted by two main telcos Vodafone Idea and Bharti Airtel, telecom division officers have estimated.

This implies that the following spectrum sale might fetch it solely round Rs 35,000-40,000 crore total as in opposition to the Rs 5.86 lakh crore price of airwaves that the federal government desires to placed on sale at base worth, specialists mentioned.

Telcos pay upfront 25% for the sub-1 GHz band and 50% for greater bands they win in auctions. The stability is paid over 16 years in equal instalments.

Senior officers informed ET that loss-making mobile phone operators Vodafone Idea and Bharti Airtel — dealing with a mixed Rs 89,000 crore in new statutory dues — are anticipated to offer the 5G spectrum a miss within the upcoming sale deliberate in March-April.

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Airtel, although, is prone to decide up some 4G airwaves, particularly in eight circles the place its permits are expiring.

“Of the three gamers, Jio could take some 5G spectrum however not a lot, apart from some 4G. We anticipate it’s going to accomplish that to get the firstmover benefit,” mentioned a authorities official, who didn’t wish to be named.

Loss-making Vodafone Idea, dealing with a survival risk and within the midst of a expensive integration course of, is predicted to largely give the auctions a miss, officers mentioned.

Spectrum Renewal Hopes

This means with out the adjusted gross income dues, the federal government will fall means in need of its Rs 1.33 lakh crore budgeted for the following fiscal yr, with solely Rs 20,000-25,000 crore anticipated to return from licence charges and spectrum utilization cost.

Airwaves throughout the 4G bands of 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2100 MHz, 2300 MHz and 2500 MHz, apart from 5G spectrum within the 3300-3600 MHz bands, can be supplied to Vodafone Idea, Bharti Airtel and Reliance Jio.

The auction, anticipated within the first quarter of the following fiscal yr, will see some 8,293.95 MHz of airwaves at an estimated complete base worth of Rs 5.86 lakh crore.

These numbers, nonetheless, look very optimistic.

‘Unrealistic Pricing’

“The government planning an auction is commendable, however, given the reserved prices for the most sought-after bands and the present financial condition of the industry, we do not believe the government will be able to garner any more than Rs 6,000-7,000 crore as upfront payment,” mentioned Rajan Mathews, director-general of the Cellular Operators Association of India (COAI), which represents all non-public telcos.

“This is not to negate the fact that there are tremendous opportunities in India, but what is getting in the way is the unrealistic pricing of the key spectrum bands that are for 5G, and the 700 MHz band,” Mathews added.

The authorities had cleared a base worth for 5G airwaves at Rs 492 crore per MHz and proposed the sale of a minimal 20 MHz blocks, which might imply a telco must spend near Rs 50,000 crore for 100 MHz — the quantum it wants to supply high quality 5G providers.

For the 700 MHz band, which was unsold on the earlier public sale, the DoT has minimize the bottom worth by 43% to ?6,568 crore a unit, or ?32,840 crore for a block of 5 MHz.

Telcos have described the charges as costly.

Earlier this week, Bharti Airtel CEO Gopal Vittal reiterated in an earnings name that the 5G airwaves had been priced too excessive. “…we will not pick it up at those prices”, he mentioned.

Previously, Vodafone Idea and Reliance Jio had termed the 5G base costs as too costly.

“At the stage that we are in and where there is tremendous pressure based on their financial health, the upcoming auctions are expected to be muted,” mentioned Prashant Singhal, international know-how, media and telecommunications (rising markets) chief at EY.

Spectrum Renewal

All hopes are pinned on spectrum renewal.

“The best case for the government is to realise value from spectrum renewals from the incumbents, and this may help the government raise Rs 25,000 crore at most, of which Rs 10,000 crore may accrue in FY21. Over and above this has to be 5G spectrum auction, which seems very unlikely given the ecosystem and spectrum pricing,” mentioned Rajiv Sharma, head of analysis at SBICap Securities.

If there’s a 50% discount in present 5G costs, then there could also be some curiosity for 3,500 MHz and one other Rs 20,000 crore may very well be raised within the fiscal yr beginning April 1, 2021, he mentioned.

“So, to sum up, spectrum auction is not going to be more than Rs 35,000 crore,” Sharma mentioned.

Already weighed down by debt of over Rs 7 lakh crore, loss-making telcos Bharti Airtel and Vodafone Idea at the moment are dealing with over Rs 35,000 crore and Rs 53,000 crore, respectively, in adjusted gross income dues after a Supreme Court order final October.

Both have filed a plea within the high court docket to be allowed to barter with the DoT on longer timelines and modalities for fee, in a bid to melt the monetary blow. The court docket has but to listen to the matter.

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