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3G spectrum auction to take time

New Delhi, April 6: The online auction of spectrum to provide 3G cellular services starting Friday can take anything between a couple of weeks and months because of the sheer size of the exercise, both in terms of the number of circles up for grabs and players involved.

As many as nine bidders are in the fray, with six vying for all the 22 circles.

“This (the auction) could potentially run for a couple of weeks. It is difficult to put an exact figure on the number of days the process may take to reach completion,” Dan Maldoom of DotEcon, which has designed the auctions, told The Telegraph.

Analysts said a recent sale of mobile licences in the Netherlands took around 18 months to be completed as the rules were complicated and each round took one day.

In India, there could initially be 4-5 rounds daily, which could go up as the momentum builds and bidders become comfortable with the system. “The process seems fairly simple as it is online and there are predefined rules to follow,” said an official of a telecom company who has placed a pan-India bid.

Six of the nine bidders — Bharti Airtel, Reliance Telecom, Idea Cellular, Tata Teleservices, Aircel and Vodafone Essar — have bid for all the 22 telecom circles. The base price for pan-India spectrum is Rs 3,500 crore.

Videocon Telecom, S Tel and Etisalat DB have bid for a limited number of circles.

Spectrum auction will be done separately for each circle because reserve prices are different across circles. However, all the 22 circles will be put up for sale at the same time, and bidding conducted simultaneously via a simple computer interface.

A “virtual auction room” would be created where bidders would be allowed to enter using a username and password to place bids from any geographical location. There are two stages to the auction — a clock stage followed by a frequency allocation stage.

The clock stage is the actual auction which can go through several rounds.

The auction starts at a base price for each circle and prices increase in subsequent rounds depending on how many players have bid for that specific circle. “For instance, if the number of bidders is one more than the number of spectrum slots, the price increase will be 5 per cent. If there are two more bidders than the number of slots, it will be raised by 10 per cent.,” said Sanjay Bhandarkar, head of Rothschild in India, which will conduct the auction.

At the end of each round, bidders would be given an option to bid for the next round (which could be at a higher price) or to opt out. When the number of bidders equals the number of slots in a given circle, the clock round stops.

All the winners will pay the lowest price reached in the last round. The players are given 20 minutes to decide on each bid; however, once a bid is placed it cannot be modified or changed.

The clock stage will be followed by the frequency allocation stage, when specific frequencies will be given out to the winners at random. The auction will be held 6 days a week between 9am to 7.30pm. “This is a unique auction system which combines features of the US and the UK auctions and is the largest auction of the decade,” said Maldoom.

He added that the process was “fully transparent” and designed to “eliminate any gaming behaviour or collusion among players”.

Analysts said given the scarcity of spectrum in main circles such as Delhi and Mumbai, bids could get aggressive. The government expects to garner over Rs 40,000 crore from the sale of 3G and broadband wireless radio waves. Industry players said diverting significant part of 3G spectrum towards high revenue earning voice services was an option worth considering.

With the department of telecom putting a ban on the allocation of additional 2G spectrum, operators are finding it difficult to accommodate the huge surge in mobile subscribers on the limited spectrum made available to them.

Touted as the next growth driver, 3G mobile phone services allow users to surf the Internet and download content, including music and video, at speeds faster than the current technologies.

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