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2G spectrum auction bids touch Rs45,000 crore on Day 2

Wednesday, 5 February 2014 - 7:27am IST | Place: New Delhi | Agency: dna

The 2G telecom spectrum auction, which witnessed aggressive bidding in the 1800 MHz and 900 MHz on Monday, maintained its trend for the second consecutive day with around Rs.46,000 crore in the exchequer’s kitty.

This amount is already four times the amount expected by the government and the third attempt to raise revenue from the sale of airwaves in the last 15 months. The earlier two auctions evoked dismal response. The current auction witnessed a promising start with excess demand coming up for the 900 MHz band in the Mumbai circle with the provisional winning amount per block being Rs 473.24 crore at the end of the seventh round of the spectrum auction on Monday.

However the auction on Tuesday witnessed a changed strategy. According to official sources, leading telcos who were vigorously competing for the 900 MHz on Monday have instead started bidding for the 1800 MHz band owing to price differential and more availability of spectrum.

“If I can get 1800 MHz for half the price of 900 MHz, why should I not go for the cheaper one. I would rather invest the `saved’ money in improving my operations,” said a leading operator.

“With excessive demand for 900MHz spectrum on day 1, the base price of the same began to get too high, and hence except for Bharti Airtel and Vodafone, which need a minimum of 5 MHz spectrum in the 900 MHz band to continue their current operations beyond November, the rest of the bidders have decided to focus on cheaper and more available 1800 MHz spectrum. Delhi may have seen excessive bidding on day 2, mainly because Bharti Airtel has to preserve its flagship circle leadership, while Assam witnessed excessive bidding because the northeast is largely under-penetrated and therefore the spectrum relatively less expensive. Besides, Reliance has historically been interested in the northeast,” said Rajan Matthews, director general, Cellular Operators’ Association of India (COAI).

Reliance Jio Infocomm, which is bidding aggressively in the auctions is also rumoured to commence its 4G operations in the northeast.

On Tuesday there was excess demand of 1800 MHz band in the Gujarat and UP (west) circle with a provisional bid price per block at the end of round 14 of Rs.33.76 crore and Rs.14.20 crore respectively.

For the 900 MHz, Mumbai saw excess demand with provisional bid price per block being Rs 552.05 crore.

The second day of the auction saw seven rounds taking the total to 14.

“Each operator is having its own strategy. They will keep their options open. There is no clarity on when the next auction will happen so if their licences are expiring they need enough spectrum to continue their services. They would want to top up spectrum in areas where they have good market share,” said Hemant Joshi, Partner, Deloitte Haskins & Sells.

The auctions are expected to continue for another two days, with bids from Bharti Airtel, Vodafone and Reliance Jio Infocomm alone expected to exceed Rs 40,000 crore, according to Jaideep Ghosh, telecom partner, KPMG.

The reserve price for a pan-India licence is at Rs 1,765 crore per MHz, about 26% lower than the March sale. A total of over 385 MHz of spectrum has been put up for auction in the 1800 MHz band while in the 900 MHz band 46 MHz of spectrum has been put up for auction.

The auction has eight players fighting for the airwaves.

Total bids reach Rs 45,000 crore (provisional) on Tuesday, up from Rs 44,000 crore (provisional) on Day 1

Delhi and Mumbai circles remained the most wanted in the 900 MHz spectrum band, due to aggressive bidding by Bharti Airtel and Vodafone to preserve their licences in these circles

Delhi saw reserve price go up by 50.4% on Day 2

Day 2 sees less demand overall for 900 MHz band, due to base price skyrocketing; telcos instead bid more aggressively in 1800 MHz band on Day 2

Telcos show significant interest in circles such as Delhi, Assam, Gujarat, Himachal, Bihar and UP

Expected bids from Bharti Airtel, Vodafone and Reliance Jio to total Rs 40,000 crore by the end of the auctions

Auctions expected to continue for 1-2 days more

—Compiled by Beryl Menezes

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