The government’s plan to garner Rs 5.6 lakh crore through sale of spectrum to telecom companies did not play out as expected. Only 40 per cent of the record 2,353 MHz airwaves that had been put up for sale was bought at a cost of Rs 65,789 crore. Cash strapped companies made bids for spectrum in the 1,800 MHz, 2,300 MHz and 2,500 MHz bands which can be used to provide highspeed 4G internet services. There were no takers for 700 MHz which was put up for sale for the first time because the initial
price was considered too high and telecom companies wanted to reserve some cash in their war chests for the battle with Reliance Jio, which has altered the nature of the game by making
data the base for usage.
Of the big players, Vodafone, which does not have a pan-India
4G presence spent around Rs 20,000 crore followed by Bharati
Airtel with Rs 14,244 crore, while Reliance Jio purchase bandwidth
worth Rs 13,672 crore. Idea, which also needs to expand
its 4G footprint shelled out Rs 12,798
crore. Around half the money will
have to be paid upfront and the remainder
over a period of 10 years.
Will this aggressive bidding change
anything for the consumer? Presently,
mobile phone users have to
grapple with call drops and slow
and unreliable internet speeds.
Since these problems are common
to all existing players there is nowhere to go for a solution. The
entry of Reliance Jio changed all this. Long queues were seen
outside Reliance Jio outlets and telecom companies slashed
data charges in order to retain customers. However, problems
with call drops and slow internet speeds still persist, thanks to
the reluctance of companies to invest in new technology and
limit the number of customers. Reliance Jio’s entry has forced
telecoms to do a reality check and simplify plans on offer.
The limiting factors for telecom companies are bandwidth and
base stations (towers). A telecom company might have sufficient
towers but if it does not have enough bandwidth, connectivity
becomes an issue. The reverse is also true. On an
average each telecom tower can handle roughly 1,500 phone
connections. The moment this number goes up calls start
dropping. With companies adding more bandwidth, connectivity
and speeds ought to improve, especially with Reliance
Jio jump starting changes in the sector.
The sector is saddled with a collective debt of Rs 3.8 lakh crore
and that could be the reason why telecom companies did not
go on a buying spree. The government will now have to review
the entry price levels of the remaining spectrum and conduct
another auction, perhaps two years from now. That would give
sector players enough time to build infrastructure, consolidate
revenue streams and improve client satisfaction.
