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3G auctions may have rung up Rs12,000 cr

3G auctions may have rung up Rs12,000 cr
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First Published: Fri, Apr 09 2010. 11 51 PM IST
Updated: Fri, Apr 09 2010. 11 51 PM IST
New Delhi: India’s auctions for high-speed mobile spectrum saw five rounds of bidding on the opening day, with the total estimated value of the bids for the spectrum across the country reaching around Rs12,000 crore.
In some circles the increment in the bids in successive rounds was 5% while in others it was 10%, a senior department of telecommunications (DoT) official said on condition of anonymity as he is not authorised to speak to the media. “The auction is likely to go on for another two weeks.”
The bids began at the base price set by the government—Rs3,500 crore for a pan-India slot of third generation (3G) spectrum. As per the rules, the auctioneer raises the bid value in each round based on demand.
For a circle with three slots available and at least six bidders, the price increment will be 10%. If there are five bidders for three slots, the bid increment will be 5% and if there are four bidders, it will be 1%.
Assuming that the bid price was raised by 10% in successive rounds, this would value each block of 3G spectrum across the country at around Rs4,500 crore or around Rs15,000 crore for the three or four blocks available at the end of three rounds.
“For some circles, the demand is not that high and the bid increments may have reduced,” a Mumbai based brokerage firm said on condition of anonymity as he is not authorised to speak to the media. “If the demand for all the circles was maintained to a minimum of six bidders for every circle then the value of three slot of spectrum would have crossed Rs20,000 crore.”
As per the daily report of the auction published by DoT on its website late in the evening, Delhi is the circle with the most demand going at a price of Rs373.29 crore for a slot of 3G spectrum at the end of Round 5. The remaining four of the top five circles with maximum demand were Mumbai, Maharashtra, Gujarat and Andhra Pradesh—all ending Round 5 at Rs362.66 crore for a single slot. “At least one of the new operators bidding for the spectrum has reduced its aggressiveness in the bidding,” an official with one of the larger phone companies said on condition of anonymity due to the sensitivity of the issue. This development could not be independently verified.
There are a total of nine bidders for 3G mobile spectrum, with six of them seeking nationwide coverage. Three to four slots per operating region are being auctioned.
The auction is expected to easily garner upwards of Rs40,000 crore for the government that is struggling to rein in a fiscal deficit that was at a 16-year high last year. The Indian government estimates that it will get around Rs35,000 crore from the online auction, which is expected to take about two weeks to complete.
The auction closed for the day at 7.30pm as scheduled with no new rounds starting after 6.30pm. After two years of deliberations, the long-delayed auction got under way at the scheduled 9.30am start on Friday morning.
The country’s telecom operators need the spectrum in order to offer high-speed data services at around 40Mbps on the mobile phone as well as a greater capacity for voice calls, significantly reducing congestion in the mobile networks.
There are 11 applicants for the BWA (broadband wireless access) spectrum auction, which begins two days after the 3G auction ends.
“We expect the (3G) auction to go on for at least two and half weeks,” said Dan Muldoon, representative of DotEcon, that is running the auction process along with Rothschild and Sons.
The auction has attracted much attention throughout the global telecom sector, given that India is the second largest and fastest growing telecom market in the world. At the end of February, the number of telephone subscribers in India increased to 600.69 million from 581.97 million in January, registering a growth of 3.22%.
Of these, 563.73 million were wireless subscribers, showing that 18.76 million wireless users were added in February.
The pace of the bidding is expected to pick up in the next few rounds. “This is just the beginning. It has only just begun and will pick up pace as we go ahead,” a senior DoT official said on condition of anonymity as he is not authorised to speak to the media.
India’s top phone companies, Bharti Airtel Ltd, Vodafone Essar Ltd, Reliance Communications Ltd and Tata Teleservices Ltd are expected to win the maximum number of slots of 3G spectrum across the country. Aggressive bidding could stretch the finances of firms and weigh on their earnings.
In 2000, the UK raised at least $35 billion (Rs1.55 trillion) from a spectrum auction, while Germany collected around $67 billion from its UMTS licence auctions.
In 2008, the US raised $18 billion from spectrum auction. Germany’s latest mobile phone spectrum auction starts on Monday, which analysts expect to raise from €3 billion (Rs17,790 crore) to €7 billion. Vodafone is also one of the bidders in the German auction.
Reuters contributed to this story.
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First Published: Fri, Apr 09 2010. 11 51 PM IST
More Topics: 3G Spectrum | Telecom | Mobile | Wireless | Revenue |