Moderate participation expected in the upcoming spectrum auctions: ICRA
- ICRA expects a relatively muted participation fetching around Rs 55,000–60,000 crore for the government due to the limited financial flexibility hampered by the increasing debt of the industry.
- This is modest in comparison to the more than Rs 4.3 lakh crore worth of spectrum being put to auction. Even at this participation, the industry will have to pay around Rs 20,000-25,000 crore upfront, while the balance will be paid over 16 years.
- Trai has recommended the auctions of more than 8,500 MHz spectrum which is valued around Rs 5.7 lakh crore considering the reserve price. Also, the impending AGR dues, are expected to result in further increase the industry debt to around Rs 4,60,000 crores as on March 31, 2021 despite sizeable deleveraging done by the telcos as well as the anticipated improvement in cash flow generation post the tariff hikes, ICRA said.
- ICRA believes a high valuation is on account of high reserve prices and high quantity of spectrum for the newer bands i.e. 700 MHz and 3300-3600 MHz, which are primarily expected to be used for 5G. The 700 MHz was put to auction in October 2016 where it went unsold and thereafter, the price for this band has been revised downwards for the forthcoming auction.
- The upcoming auctions will provide an opportunity for the telcos to renew their expiring spectrum holdings in the 800 MHz and 1800 MHz bands.
- Government had budgeted Rs 1.33 lakh crore as non-tax receipts from the telecom sector for FY2021.
- While the regular receipts – license fee and spectrum usage charges are expected to fetch around Rs 20,000 crores, the telcos will have to pay Rs 20,000-25,000 crore as upfront payment for the forthcoming spectrum as per ICRA expectations.
- In addition, the telcos are required to pay Rs 90,000 crore as AGR dues as per the Supreme Court order. The government is considering telcos request to pay the AGR dues over 20 years period. If the telcos pay this amount upfront, the government will meet its target for FY2021, while in case of staggered payment terms stretching to 20 years, there will be a sizeable shortfall in the government collections.
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