New Delhi: Telecom spectrum in the 2,100 megahertz (MHz) band, needed for providing 3G services, continued to get the least attention from telcos bidding in the ongoing airwaves auction, while the prices in the 800MHz and 900MHz bands continued to rise.

On Monday, the fifth day of bidding, 31 rounds were completed with cumulative bids inching towards 1 trillion. The day’s bidding closed with cumulative bids at 94,000 crore.

Data from the department of telecommunications showed reduced attention on 900MHz spectrum, and a marked shift to the 800Mhz band. The data showed that the five circles of Haryana, Delhi, Andhra Pradesh, Assam and the North-East are seeing excess demand for 800MHz, while for 900MHz spectrum, there is excess demand in Haryana and West Bengal.

The 900MHz band spectrum was expected to get the most attention, especially from the three major telcos—Bharti Airtel Ltd, Vodafone India Ltd and Idea Cellular Ltd—due to its lower requirement for investment in network and tower infrastructure and the fact that the bands can be used for both 2G and 3G services. The 800MHz spectrum, generally used for CDMA-based telecom services, is attracting attention due to its ability to be used for FD-LTE (frequency duplex long-term evolution) versions of 4G-based telecom technology.

The 2,100MHz band, the first spectrum band to be auctioned in India, is getting much lesser attention from bidders, compared with the auction in 2010, when three blocks of 5MHz were sold at many multiples of the reserve price. This time only one block is available for sale across 17 circles.

The government is selling 103.75MHz in the 800MHz band, 177.8MHz in the 900MHz band, 99.2MHz in the 1,800MHz band and 85MHz in the 2,100MHz band. At reserve prices, the government expected to raise a minimum of 82,000 crore if all airwaves were sold. The government received bids totalling 000 crore on the first day of bidding on Wednesday, which went up to 86,000 crore on Saturday, the fourth day of bidding.

Another key reason for the interest in 900MHz is the fact that it is mostly spectrum already held by the three big operators. However, the validity of the right to use this spectrum is ending later this year and the operators need to retain it. However, if they fail to retain the 900MHz, they will be forced to get 1,800MHz spectrum, most of which is also expiring, and costs more to build a network because more telecom towers are needed to service users. The telcos are also expected to bid aggressively for 1,800MHz spectrum.

Some of the telcos have been able to hedge the risk of losing spectrum in some circles by acquiring airwaves in last year’s auction, but still need to acquire more to be able to offer the quality of services mandated by the telecom regulator.

“The 900MHz auction average prices are now up approximately 75% over the reserve price. The count of circles where prices have already doubled is now five. However, the bidding intensity here appears to be slowing. 800MHz continues to surprise with 87% of all spectrum now assured of being sold. Prices in nine circles are above reserve prices. In 2,100MHz, 76% of spectrum is assured to be sold," Sunil Tirumalai and Chunky Shah, analysts with Credit Suisse Securities Research and Analytics, wrote in a Monday morning report on Saturday’s bidding.

The rate of increase of the bids has some analysts worried.

“If all operators were to renew their existing spectrum at the last provisional price, the cash outflow for Idea/Bharti is approximately 66%/60% above the reserve prices at 287 billion/ 161 billion," the Credit Suisse report said. “At these prices the operators could be forced to start choosing which circles they want to retain—and hence this auction may have a much bigger impact on the industry than just the spectrum amounts on the incumbents. We remain cautious on the sector."

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