The government managed to receive bids worth Rs 77,814.80 crore in the recently concluded spectrum auction. (Reuters)
Telecom analysts believe that a sharp downward revision by the government in its telecom non-tax receipts for FY22 indicates that 5G spectrum sale in the 3.5 GHz band is unlikely in the next fiscal.
Budget documents released on February 1 show that the government has slashed its budgeted telecom non-tax receipts for FY22 by 60 percent to Rs 53,987 crore. In the previous budget (FY21), the government had set an ambitious revenue target of Rs 1.33 lakh crore, but had later revised it to Rs 33,737 crore.
"We believe 5G spectrum auction is unlikely in FY22. In the recently concluded auction, both Jio as well as Airtel invested large amounts and have increased their 4G coverage as well as capacity spectrum holdings. Over the next few months the companies are likely to focus on putting this spectrum to use and strengthen their 4G networks," said Kunal Vora, Senior Telecom Analyst, BNP Paribas.
He added, "Recently Bharti Airtel has said India will be 5G ready in 2-3 years, and we believe that operators will look to improve 4G monetisation rather than invest in 5G in FY22. The government’s revenue expectations from telecoms is more realistic in FY22 compared to FY21, and we believe it does not include 5G spectrum auction proceeds."
The government usually earns its non-tax revenue from the telecom operators in the form of licence fees and spectrum usage charges. It also earns its non-tax revenue from the proceeds of spectrum auction AGR payment.
In FY21 ending March 31, 2021, the government is expected to net over Rs 20,000 crore as upfront payment from telcos for the 4G airwaves auction that concluded on March 2.
The government had auctioned airwaves across seven bands worth Rs 3.92 lakh crore and had managed to receive bids for spectrum worth Rs 77,814.80 crore by beating analysts expectations.
Ankit Jain, Vice-President, Corporate Ratings, ICRA noted, "The non-tax revenue receipts for GoI for FY21 are likely to be higher than the revised estimates. In the event no AGR payments are required to be made by the telcos in the current fiscal, the non-tax receipts are expected to be around Rs 45,000-50,000 crore."
"This includes a major part of the upfront payment of the recently concluded spectrum auctions to be made by March 31, 2021, with some spillover to FY22 for spectrum which will be available at a later date. For FY22, the estimated non-tax receipts are expected to be around Rs 40,000-45,000 crore in the absence of 5G-spectrum auctions," he added.
Differing in view, Isha Chaudhary, Director, CRISIL Research, noted, "The demand notices for the upfront payment from the recently concluded spectrum auctions were issued soon after the auctions. Thus the proceeds from the same will add to the government’s current year revenues from the telecom sector resulting in revenues surpassing Rs 50,000 crore against revised estimated of Rs 33,737 crore."
In FY22, the government has budgeted Rs.53,987 crore, of which around Rs 30,000-35,000 crore is expected to be from licence fees, spectrum usage charges and AGR dues instalments. This leaves a balance of around Rs 20,000 crore of revenue from other areas. However, the upfront payment from 5G auctions is likely to garner significantly larger amount and hence if 5G auctions do take place, the government may end up getting higher collections than the budgeted estimate in FY22, she added.
Given the pace of 5G deployments in other major economies and Indian Telcos getting their networks 5G ready, the government is likely to try to schedule the 5G spectrum auctions in the current year itself, Isha concluded.Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.