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Spectrum Auction: Advantage to Companies, Government

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Spectrum Auction: Advantage to Companies, Government
Published : Friday, 24 April, 2015 11:26 AM
MBA aspirants must be updated with General Awareness on current topics. General awareness topics with analytically drawn conclusions will benefit you in XAT, IIFT, CMAT,  MAT, Essay writing, General Awareness sections besides in GD & PI. 

Spectrum Auction: Advantage to Companies, Government and Consumers

India is world’s second largest telecommunication market which has registered exponential growth over the last few years. In March 2014, the total telephone connections in India existed at 933 million while teledensity reached 75.2 percent. According to a report by GSM Arena (GSMA), there would be around 213 million internet connections by June 2015 and by 2020, India would become the fourth largest smartphone market in the world. Ensuring the continuous growth of telecom sector, Government auctioned 380.75 megahertz (MHz) of second generation (2G) spectrum in three bands—the premium 900 MHz, 1800 MHz and 800 MHz in March 2015.

According to a recent 'MBit Index study' by Nokia highlighting details about mobile broadband performance in India, there was an increase of 74% in mobile data traffic generated by both 2G and 3G mobile broadband services in 2014.

The Government of India has earned nearly INR1,10,000crores by auctioning the spectrum to the private players which is higher than the previous record of INR1,06,000 crores registered in 2010 for the 3G and broadband auctions. While the latest auction has filled the coffers of the government, it would also help in expanding the base of the telecom companies and consumer, the most important stakeholder in a market economy, would have a better services. The detailed effect on all the three stakeholders is as under –

  • Apart from generating huge revenues for the government, the latest auction had also helped in cleaning the blot of 2G scam.
  • It would help in realising the vision of ‘Digital India’.
  • Improvement in telecom infrastructure is crucial for wholesome development of smart cities.
  • Additional spectrum released during the auction would help in expansion of 3G services across the country.
  • It had also unleashed the opportunity to selectively roll out 4G services.
  • Government’s plans to roll out free high-speed Wi-Fi in 2,500 cities and towns across the country over the next three years would get a boost.
  • Consumers are expected to get a minimum of 2 megabits per second (MBPS) Wi-Fi speed at every government owned service.
  • With the development of telecom sector, services such as security and surveillance, remote monitoring of ATM machines, traffic management, retail, logistics, and grid energy would also benefit.
Telecom Companies
  • Around 77% of the bids came from just three players – BhartiAirtel, Vodafone and Idea Cellular. If MukeshAmbani’s Reliance Jio is also included the total earnings from four players in the latest auction reached 86%.
  • When most of the new allocated spectrum is cornered by these four big telecom companies, it is highly likely that these companies will strengthen their base in the coming days while the rest may shrink.
  • The companies with relatively small market share may go into merger and acquisitions thus consolidating the telecom industry.
  • Most of the money paid by the companies would obviously come from banks. Weak players may have to sell their allocated spectrum to big players at a premium to repay the bank loans.
  • As the voice calling is becoming unremunerative due to low prices and new web based technologies like Skype, small players are expected to focus on data.
  • In most likelihood, consumer would be the biggest beneficiary as they would be getting better services.
  • Improved infrastructure would also see the expansion of 3G services and launch of 4G services.
  • However, high price paid by the companies would be passed on to the consumers thus increasing their mobile bills.
The latest spectrum auction is benefitting every stakeholder in some way or other. India is poised to have 700 million internet subscribers in next 10 years. With the favourable policies and 4G services being rolled out, the Indian telecom sector is expected to witness huge growth over the next few years.
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