Debate is on in India, whether the spectrum of satellite service should be auctioned or must be given administratively. In both situations, the regulators will face the task of estimating the pricing of the satellite spectrum. The strategy for estimating the price can be many. But to check whether we are in the ballpark range one can use the outflow of spectrum prices (applicable to the Indian telecom Industry) as a reference. This note calculates the Total Industry Outflow for spectrum auctions since 2010 and compares the same with the Industry’s Gross Revenue, and using this information makes an attempt to estimate the price of the satellite spectrum.
Assumptions
Since the price of spectrum applicable to the satellite industry will most likely be a % of their gross revenue, therefore, to make an apples-to-apples comparison, I have assumed that the total auction outflow in all spectrum auctions since 2010 is deferred with a “Zero” period of moratorium at the applicable rate of interest specified in the NIA (Notice Inviting Application). The payment is then spread over a 20-year period with yearly installments calculated based on the formula which is explained in my earlier note dated 18th Nov 2017 titled – Deferred Payment Calculation Formula. Those interested in the fundamentals, i.e. how the formula is derived, can refer to the workings below.
