What makes for a good auction? The more scarce the item on sale, the more valuable it is bound to be. Going by that, the Indian telecom spectrum auctions are becoming more of hot & bake sale than an auction.
Yesterday was day two of India's 5G spectrum auction. Spectrum auctions are highly anticipated events—the government has its eyes on the revenues it will make by selling spectrum. At the same time, telcos are focussed on elbowing each other out band to band.
But for an event about auctioning airwaves, the 2022 auction is turning out to be a lot of hot air. For one, the auction is not even an actual auction—the telcos have bought every bit of the radio spectrum at the reserve price—the lowest price that can be offered at the auction. In 2015, 78.7% of the spectrum was sold above the reserve price. In 2016, it fell to 21%. By 2021, it had become Zero.
Even the prized 5G spectrum didn't go for higher than the reserve price, even though everyone lapped up the spectrum. Still, the event was not without its surprises. Reliance Jio saved the government from embarrassment by snagging the white elephant of this auction - the 700 MHz band. This came only after prices for that band were slashed. [Still, Jio would have to pay US$4.9 billion (Rs 39,270 crore) for this.] Note that the auction is practically over, but some nominal purchases may happen today.
The auction is a reminder of why this spectrum auction event is increasingly becoming a non-event as the government has sucked the demand-supply dynamics out of the auction by putting all the spectrum up for sale.
