Spectrum Auction: Telecom industry to mount debt worth Rs 4.25 lakh crore

India's largest Spectrum Auction concluded witnessing the weak performance by the telecom companies. Following the auction, the telecom industry's debt may rise to around Rs 4.25 lakh crore as against Rs 2,90,000 crore as in March 2014, an Icra report said.

In value terms, the government garnered only 12% of the spectrum value - Rs. 65,789 crore as against Rs. 5,67,328 crore worth of spectrum put to auction. 

The five-day auction witnessed moderate participation from telecom operators eventually acquiring mere 41% of the total 2350 Mhz of spectrum on offer. With the spectrum, the government got half of it as upfront payment this fiscal. 

Having similar views, another rating agency, Crisil said, that during the spectrum auction, the telecom operators intended to ramp up their 4G and 3G spectrum without overspending at auction. 

This is 43% short of the Rs 56,000 crore estimated in the Union Budget for this fiscal from the auctions (excluding licence and spectrum usage charges), the Crisil report said.

Commenting on the spectrum, Prasad Koparkar, Senior Director, Crisil Research, in a note titled 'Telecos avoid overspending at auction', said, "Operators clearly intended to ramp up their 4G and 3G spectrum holdings at minimal upfront cost, given the significant debt overhang (industry debt approximately Rs 4 lakh crore as of March 2016)".

As per the report, the telecos are facing rising network congestion in circles with high data consumption. 

As per the data released by Department of Telecom, the 2100 Mhz received bids worth Rs 12,040 crore. The 1800 Mhz received bids worth Rs 531 crore. The 800 Mhz collected bids worth Rs 1153.9 crore. The 2300 Mhz received bids worth Rs 7895.06 crore. The 2500 Mhz collected bids worth Rs 5870.8 crore.

However, the telecom operators stayed away from 700 MHz spectrum, which was priced 14 times 2300 MHz and 4 times 1800 MHz.

Reliance Jio, Vodafone, Bharti Airtel, Idea Cellular, Tata Teleservices, Reliance Communications and Aircel were in the fray for the spectrum auction. 

However, the auction consolidated the competitive position of Reliance Jio, Bharti Airtel, Vodafone and Idea Cellular.  These four operators cumulatively account for over 90% of the aggregate spends at the auction, the report added.

State wise, bidding was most aggressive in Mumbai, Bihar, Uttar Pradesh (East) and Gujarat circles, as per the data released by Department of Telecom (DoT). 

According to the Crisil report, Vodafone was the most aggressive, reportedly forking out Rs 20,280 crore for 283 MHz spectrum.

New entrant in Telecom sector, Mukesh Ambani led Reliance Jio acquired 269.2 Mhz spectrum in the 800 Mhz, 1800 Mhz and 2300 Mhz for Rs 13,672 crore. Bharti Airtel,  in a release said that it had acquired 173.8 Mhz spectrum across 1800/2100/2300 MHz bands for a total consideration of Rs 14,244 crore in the latest spectrum auction.

While, Aditya Birla led telecom arm, Idea Cellular had acquired 349.20Mhz of spectrum for Rs 12,798 crore.

Further, as per the report, the demand or bidding interest for 2300 Mhz and 2500 Mhz were higher than the rating agency's expectation. The auction showed that the operators had opted to increase capacity to offer 4G services without coughing up huge amount. 

However, since the coverage characteristics of these spectrum bands is distinctly inferior to 700 MHz, operators will have to spend larger amounts towards network rollout over the next few years, the report suggested.