×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

3G auctions to start on 9 April in new timetable

3G auctions to start on 9 April in new timetable
Comment E-mail Print Share
First Published: Thu, Feb 25 2010. 12 25 AM IST

Graphic: Ahmed Raza Khan/Mint
Graphic: Ahmed Raza Khan/Mint
Updated: Thu, Feb 25 2010. 12 25 AM IST
New Delhi: The Centre will start its long-delayed auction of the third-generation, or 3G, spectrum on 9 April, the fourth time it has rescheduled the sale of the high-speed mobile licences in two years.
Graphic: Ahmed Raza Khan/Mint
The department of telecommunications (DoT) will issue a notice inviting applications (NIA) for the auction on Thursday. The NIA is a legally binding document that will contain detailed auction terms, including slots—three or four—and frequencies as well as methods of payment.
“If it happens, it’s great,” said Kunal Bajaj, managing director of consulting firm BDA Connect. “The main concern is the number of slots. If there are three (in an operating region), then that will lead to inflated prices. But then, it (the auction) should happen first.”
DoT has given potential bidders till 19 March to file applications. A mock auction on 5-6 April will precede the exercise.
The auction for Broadband Wireless Access will be held two days after the close of the auction of the 3G spectrum. The delay will mean that the government, which is expecting Rs35,000 crore from the auction, won’t get the money by 31 March, depriving it of the chance to curb the widening fiscal deficit now running at a 16-year high.
“The deficit this fiscal has already been factored in at 6.4% (of the gross domestic product) because of the base year revision,” N.R. Bhanumurthy of the National Institute of Public Finance and Policy, a New Delhi-based think-tank, said. “So if 3G spills over to the next (financial) year, the FY10 deficit may at worst be 6.6% or thereabouts.”
The latest rescheduling took place after the law ministry opposed DoT’s proposal to refund bidders their money with interest if the 3G spectrum couldn’t be allocated by 30 September. DoT wanted to allocate the spectrum in September after the ministry of defence vacated the required slots. Any refunds would have led to the government losing money, which led the law ministry to oppose the move.
All major telecom operators including Bharti Airtel Ltd, Vodafone Essar Ltd, Reliance Communications Ltd and Tata Teleservices Ltd (TTSL) have readied plans to enter the auction, leading analysts to believe that bids could go up to twice the reserve price of Rs3,500 crore per pan-India slot.
Stein-Erik Vellan, managing director of Uninor, (Unitech Ltd), one of the newer entrants, has said that the firm would be looking at bidding for some telecom circles.
The latest timetable comes days after the telecom minister A. Raja said the auction would completed by May as all contentious issues had been resolved.
“At this point, it’s wait-and-see till the NIA comes out and (whether) all the gaps and loopholes that were there in the draft are plugged in or not,” said Bajaj of BDA Connect.
Analysts expect an all-India 3G licence to cost $1-1.5 billion (Rs4,630-6,945 crore) and rolling out the high-speed networks could cost billions of dollars more. Analysts said companies already have lines of credit in place and some have already taken or are in the process of seeking an enabling resolution to raise more money through debt. Idea Cellular Ltd got approval to raise up to Rs25,000 crore at a board meeting on 21 December.
In a notice to stock exchanges on 15 February, TTSL said it will have an extraordinary general meeting on 13 March to increase its total borrowing to Rs8,500 crore from Rs6,000 crore.
“There is no problem of funds at least for listed companies. This issue has been dragging for so long that even the smallest of companies have got enough time to be ready with the cash,” said Rahul Jain, equity analyst with Angel Broking Ltd. “Now the competition will depend on how many slots the government plans to auction in a particular circle.”
Analysts warned that the auctions will bleed telecom companies, already reeling under a price war. “They will have to raise more funds for this auction and the break even for these companies will be delayed further,” said Akash Gopawar, equity analyst with Systematix Shares and Stocks India Ltd.
Joel Rebello in Mumbai and Reuters contributed to this story.
shauvik.g@livemint.com
Comment E-mail Print Share
First Published: Thu, Feb 25 2010. 12 25 AM IST