India reaps a bounty on the first day of spectrum auctions – but it's a lot less than what the government wanted

• The Indian government reaped a record ₹77,000 crore on the first day of 2021 telecom spectrum auctions.
  
• There are two positives for the government – its strike rate has drastically improved, and the value sold so far is the second highest in spectrum auctions so far.
  
• However, the total sales are still a lot lower than what the government would have wanted.
  

The 2021 spectrum auction is underway and the first day has already reaped a bounty for the Indian government. However, it might still fall way short of what the government wanted.

The 2021 spectrum auction kicked off on March 1, with the government hoping to mop up to ₹3.92 lakh crore. Expected to be held over two days, the first day saw bidding worth ₹77,000 crore, with more bids expected to be made today.

The first day’s bidding alone means that this is the second highest revenue that the government has made from spectrum auctions, so far.

2021 spectrum auctions see a drastic improvement in strike rate

The bids that the government has attracted this year are also relatively better when compared to the last auction which was held in 2016.

For instance, the government had put up spectrum worth ₹5.63 lakh crore for sale in 2016. Out of this, the total value of bids made was ₹65,789 crore. This is a strike rate of just 12%.

The first day of 2021 spectrum auction alone puts the strike rate at 20%, with the second day bids yet to be added to the tally. The government has put up spectrum worth ₹3.92 lakh crore for sale this year, and it has received bids worth ₹77,000 crore.


Note: Spectrum sold as on March 1, 2021. More bids to come on March 2, which will increase the amount.

Here is how much each telco has paid so far

Reliance Jio, the current market leader in terms of users, is expected to make the bulk of the bids this year as the spectrum it acquired from Reliance Communications is expiring. It has paid ₹10,000 crore as earnest money deposit (EMD), which is more than 3 times that of Airtel.

Bharti Airtel comes in second, and it is expected to only fill in the gaps in its spectrum requirement. This reflects in its EMD of ₹3,000 crore.

Struggling telco Vodafone Idea barely registered its presence with an EMD of just ₹475 crore.

Earnest Money Deposit (EMD) is a security deposit that is made in major transactions to show that the applicant is serious and earnest about wanting to complete the transaction.

Here’s how much each telco is expected to spend in total:


Source: Economic Times

Note: 1. Expected spend is calculated at 5-7 times of the EMD, based on trends of past spectrum auctions.

Which bands are attracting the most bids?

The spectrum auction includes the following bands – 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz and 2500MHz.


Source: Department of Telecommunications

Of these, 700MHz and 2500MHz bands have remained unsold so far. The 700MHz band alone is valued at nearly ₹2 lakh crore, which is more than half of the total value of spectrum made available for auction.

The 700MHz band is useful for improving indoor coverage, for instance, in buildings, offices, homes and more.

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