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City surprise in spectrum race

New Delhi, Feb. 4: The 2G spectrum auction has put the spotlight on Calcutta which has emerged as the only telecom circle out of the 22 in the country after the 14th round of bidding that has thrown up a price that is 68.6 per cent higher than the price realised in the frenetic 3G auction in May 2010.

On Tuesday, the provisional winning price for 2G spectrum in the 900MHz band for the Calcutta circle was placed at Rs 183.54 crore per block size of 1MHz.

The 3G spectrum was auctioned in block sizes of 5MHz and the price realised in Calcutta was Rs 544.26 crore, translating into Rs 108.85 crore per 1MHz.

Interestingly, the highest bid for Calcutta was Rs 192.71 crore but the provisional winning price was lowered under the terms of the auction structure when bidders start dropping out of the race.

Out of the 12 blocks in the 900MHz band up for sale in Calcutta, the demand was assessed at 10 blocks at the end of the 14th round.

The huge success of the 3G auction had whetted the appetite of the government for more spectrum auctions. But after two moderately priced 2G spectrum auctions in November 2012 and March last year, the current round is starting to yield big numbers once again.

The Calcutta price discovered till now, is 54.2 per cent higher than the reserve price and 6 per cent higher than end-bids yesterday.

Mumbai was the other circle that witnessed aggressive bidding. Bids in Mumbai yielded a price of Rs 552.05 crore for 1MHz of spectrum in the 900MHz band — which is believed to have the best propagation characteristics and is highly valued because of its low capital expenditure costs on base stations and other telecom gear.

The Mumbai bid price after the 14th round was 68.3 per cent higher than the reserve price and 16.7 per cent higher than the price realised at the end of the seventh round on Monday. But it was still 15 per cent adrift of the 3G spectrum price of Rs 649.91 crore for 1MHz of spectrum.

Delhi was the third circle in the 900MHz band that saw the bid climb to Rs 530.73 crore, 50.4 per cent more than the reserve price as well as 23.8 per cent higher the provisional winning bid at end of the seventh round.

Like Calcutta, Delhi also saw the bid soar to Rs 541.34 crore but it wasn’t treated as the winning bid price at the end of the round.

In all, aggressive bidding saw total potential revenue of all 3 circles of 900MHz and 22 circles of 1800MHz radio waves, put up for auction, rise to Rs 46,000 crore at the end of 14 rounds of auction in two days compared with Rs 41,918 crore bid yesterday.

In the 1800MHz band, Gujarat proved to be much sought after with bidding rising to Rs 33.76 crore for a 200KHz block, translating into a price of Rs 168.8 crore for 1MHz of spectrum in the 1800 band — which is the least valued by GSM players.

Only five circles — Assam, Bihar, Gujarat, Uttar Pradesh (West) and Bengal — saw the bids rise above the reserve prices in the 1800MHz band.

The bidding for spectrum in the 900MHz band has been brisk because the big boys of telecom — Airtel and Vodafone — will have to relinquish a part of the spectrum allotted to them in 1994 at the end of the 20-year tenure. The companies have been contesting the government’s position that they must vacate the spectrum in November at the end of the term on the ground that their licence terms had guaranteed a 10-year renewal.

The government is no longer bundling spectrum with the telecom licence and it does not want to give the incumbents an unfair advantage over the others.

Under the terms of the current auction, bidders whose licences are due to expire in 2014 will be treated as new entrants and their spectrum will be put up for auction.

“We took the bold step of rationalising reserve prices and on the first day itself you have bids worth over Rs. 40,000 crore,” telecom minister Kapil Sibal said on the sidelines of a function to launch cloud computing services for public departments.

The government had set a pan-India rate of Rs 1,765 crore per MHz as the start price for spectrum in the 1800MHz band, which is about 26 per cent lower than the base rate in the March 2013 sale, where there were no takers for GSM airwaves.

For the 900MHz band, it approved a rate that is about 53 per cent lower than the March auction price. The Telecom Regulatory Authority of India had recommended a minimum price of Rs 18,000 crore for 5MHz of pan-India spectrum in the 2012 auction, Sibal had said at the time.

“If you have an irrational reserve price, the market will not be attractive. I have been saying that. Now, people should realise how irrational it was at that point in time for media and everybody to shout that the government is losing revenue,” Sibal said.

Eight companies, including Mukesh Ambani’s Reliance Jio Infocomm Ltd, Bharti Airtel and Vodafone are competing for two bandwidth slots — 900MHz 1,800MHz in 22 circles.

Individual company bids are not being disclosed before the end of the auction. Companies need to pay a quarter to a third of the winning price upfront and remainder through 2026 in 10 equal instalments. They will be granted a two-year moratorium after the upfront payment, which means the first instalment will not be due until end-March 2017.

 
 
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