High reserve protected against giveaway pricing. The telcos got the spectrum they can put to use for $10B, about all they could spend. In two to four years, the government likely can re-auction the unsold spectrum for a much higher price. Normally, it's a good thing to put spectrum to use. In this case, most would have gone unused if transferred to the carriers.
Manoj Gairola echoed other reporters in Spectrum auction fiasco: DoT should come out of denial mode and introspect. I disagree that "The latest Spectrum auction has failed." Nearly all analysts agree that companies like Bharti and Idea are facing serious issues with their balance sheets. Vodafone had to pump $7B in Vodafone India. They didn't have the cash to bid much more. They couldn't have afforded to spend more. The Indian telcos are struggling to finance the buildout on the spectrum they have bought; it would be impractical for them to buy and then build the 700 MHz band. Goldman Sachs had predicted the companies wouldn't spend more than $7B. "Higher debt levels following the auction and lower profitability from pricing pressure will likely raise industrywide leverage,” Annalisa Di Chiara of Moody's concluded.
Sunil Bharti Mittal, head of India's largest phone company, agrees the companies got what they needed. “Spectrum was one of the biggest issues that has been resolved to a very large degree. Lots of spectrum was put up on the table. Most has been picked up and more will be picked up. I think the rollout is now accelerating.“ Minister Sinha adds, “I totally disagree with the statement that this spectrum auction was a `failure' (according to newspapers) ... I think Digital India will get momentum after this spectrum auction.“
The financially stretched companies would have had to spend $biliions for spectrum they would barely use for years. They can spend their limited funds on building today's networks.
In two to four years, the companies should be ready to put the spectrum to use. The government can look forward to a much better return. The shortfall is an issue for this year's budget, but a tax amnesty raised more than expected and will cover most of the extra deficit. The revenue foregone will be more than made up in a few years.
Reliance Jio signed up 16M 4G customers in 26 days, a kickstart to India's broadband.
Quote from Moody's added 10/13