Why are India’s spectrum auctions not yielding much? Inventory overhang, fewer players, tepid 5G offtake

Given that spectrum is a limited resource, the government sells it to telecom companies through auctions making for a healthy source of revenues for the exchequer. Lately, there’s a problem: telecom operators are showing up to bid but most of the spectrum is being sold at the reserve price. That’s like holding an auction but bids don’t go beyond the starting price.

As India prepares for the next telecom spectrum auction, Mint explains what’s behind the weak demand, why the government is worried, and the fixes the telecom regulator is considering.

What are the concerns related to spectrum auctions?

Just like in the auctions of Indian Premier League (IPL) cricket, a base price is set for a player and bidding by different teams are built upon that, in spectrum auctions, too, the government sets a base or reserve price for the spectrum and expects companies to go higher with their bids.

Auctions are considered an efficient market mechanism to help allocate spectrum rights among bidders. The government sets a base price for it and telecom companies bid for it based on their business case. Typically, the higher bids come from those that have all but used spectrum that they won in the past or have an aggressive plan to expand their subscriber base by offering improved connectivity.

The trend has been visible since 2016 when spectrum was largely sold at not much more than the reserve price set by the government. However, this became more stark in the last two auctions in 2022 and 2024—indicating low demand for spectrum. This led the department of economic affairs (DEA) to flag a lack of effective competition in the sector that could lead to further poor auction outcomes.

One of things, which DEA wants the Telecom Regulatory Authority of India, or Trai, to figure out is whether spectrum being offered is more than what companies need and how auctions could be made more competitive.

Why is spectrum not attracting strong demand during auctions?

One of the reasons for low demand in the 2024 auction was the significant spectrum inventory, especially in the fifth generation (5G) bands, after auctions from two years earlier. Other reasons include lower-than-expected demand for 5G services, consolidation leading to fewer plays in the industry, and the lack of a mature device ecosystem and use cases for specific, newly offered spectrum bands.

In the June 2024 auction, a total of spectrum worth ₹96,238.45 crore was put on the block. Of this, 141.40 MHz of airwaves worth only ₹11,341 crore. Before that, in 2022, before the launch of 5G services, operators had acquired spectrum worth over ₹1.5 trillion of the ₹4.3 trillion worth of airwaves on the block. Though this was the highest-ever auction revenue proceeds received in a single auction, the gap indicated the spectrum offered significantly outstripped market demand for it.

What points to a grim outlook for the future spectrum auctions is limited competition in the sector. In 2014, there were 14 players in the sector, which have been now reduced to only three private players and one state-owned operator. Reliance Jio Infocomm Ltd and Bharti Airtel Ltd, today dominate the sector with a 75% share by subscribers. The rest is held by government-owned Bharat Sanchar Nigam Ltd (BSNL) and Vodafone Idea Ltd which is struggling financially.

What is Trai suggesting to increase competition in auctions?

To address the concerns raised by the DEA and enhance competition, Trai suggests opening up auctions to more types of service providers. Currently, only access service providers (like Jio, Airtel, and Vodafone) can participate.

In a public consultation paper late September, Trai has recommended that internet service providers and entities providing large connected device networks also be allowed to bid, especially in bands like 37-40 GHz, which is typically used for applications requiring very high capacity and ultra-low latency.

It also proposes lowering entry barriers so that new players can consider obtaining licences and joining future auctions. The regulator believes this would diversify participation and improve auction outcomes.

Is the reserve price hurting competition and demand?

A recent analysis by V.J. Christopher, wireless advisor at the department of telecommunications, showed that prior to 2016, scarcity of supply of spectrum and strong demand drove auction premiums well above reserve prices. However, from 2016 onwards—and particularly after 2021—premiums disappeared. The analysis said scarcity was the sole significant driver of premiums, while high reserve prices, industry consolidation, and heavy 5G-related capital expenditure weakened competitive bidding.

“High reserve prices have acted as ceilings, leading to persistent unsold inventory and opportunity losses in both revenue and consumer welfare,” Christopher said in the analysis, adding that India’s spectrum auctions have shifted from a seller’s market (scarcity-driven, high premiums) to a buyer’s market (abundant supply, demand-constrained at high reserve prices).

In the recent consultation paper for spectrum auctions, Trai acknowledged that while reserve price is an important factor, it is not the sole reason for low demand. Other elements—such as whether a company’s spectrum license is expiring, its financial condition, previous spectrum holdings, and market strategy—play major roles. Trai emphasises that reserve prices should be rational and balanced: too high, and they discourage participation; too low, and they risk undervaluing public resources.

Notably, high spectrum prices also influence telecom services tariffs at the consumer level.

Should the government reduce the spectrum supply?

The DEA has raised the idea of aligning spectrum supply with expected demand, possibly to create scarcity and boost prices. However, Trai cautions against this. It argues that spectrum supply should not be artificially restricted, as this could lead to valuable frequencies sitting idle. Given India’s growing demand for mobile data and digital services, driven by 5G, artificial intelligence, and wireless broadband, restricting supply could hurt service expansion and national digital goals, the regulator said, adding that it has never recommended cutting supply based on predicted demand.

Is less spectrum auction receipts a concern for the government?

For fiscal 2026, the government has projected a ₹44,744 crore of spectrum auction receipts. This includes the installments of previous spectrum auctions, payments by companies before the schedule and any upfront payments companies do after acquiring spectrum in a particular year.

Notably, in FY22, the spectrum auction receipts were at ₹60,814.06 crore. A lack of bidding intensity among private operators, could prompt lower spectrum revenues in future for the government. Notably, for BSNL, the government reserves the spectrum that is given administratively without auction. The cost of that spectrum is paid by the government — usually through budgetary support.

While Trai highlighted that auctions generate government revenue, maximizing revenue is not the main goal. The bigger priority is to ensure that spectrum is used efficiently to deliver high-quality telecom services, expand broadband access, and support India’s digital growth.