Cash clue in spectrum show

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  • Published 4.02.14

New Delhi, Feb. 3: The government’s gambit to auction spectrum ahead of the interim budget is paying off with bids likely to result in earnings of Rs 41,918 crore, much higher than the Rs 11,300 crore initially estimated.

Eight operators, including home-grown Bharti Airtel, Britain’s Vodafone and newcomer Reliance Jio Infocomm, participated in the seven rounds of bidding on the first day of the auctions for all the 22 circles in the 1,800MHz band and the three circles in the 900MHz band.

“I think it is going very well… it is exceeding expectations. We should see a smile on the face of the finance minister,” said telecom minister Kapil Sibal.

Bidding was aggressive mainly in the 900Mhz band for Calcutta, Mumbai and Delhi. The bids were in excess of the reserve price by 38.5 per cent in Calcutta, by 44.3 per cent in Mumbai and by 19.1 per cent for Delhi.

However, the response to the 1800MHz radiowaves was lukewarm. Bids stuck to the reserve price in 16 circles with Tamil Nadu and Odisha being the worst performers. The bids managed to exceed the base price in only six zones — Bihar, Gujarat, Uttar Pradesh (east), Uttar Pradesh (west), Bengal and Jammu & Kashmir.

An interesting trend is the massive response for the Mumbai circle in the 900MHz band as opposed to the traditional favourite Delhi. A clear indicator of this is the per block price increment applicable for Round 8, which is Rs 23.66 crore for Mumbai compared with to Rs 4.28 crore for Delhi.

The auction started as planned after the Supreme Court yesterday refused to interfere with an order of the telecom tribunal dismissing the pleas filed by Bharti Airtel, Vodafone, Loop and Idea for a stay on the spectrum sale and extension of their licences by 10 years.

The department of telecom (DoT) has put on block about 385MHz of radiowaves in the 1800MHz band and 46MHz in the 900MHz band. Normally, six to seven rounds of bidding take place in a day and bidding can last for weeks, driving up the prices.

This is the third round of spectrum auctions after the Supreme Court directed that all radiowaves freed after the cancellation of 122 licences in February 2012 should be auctioned.

Besides, the 900MHz has to be auctioned as some of the radiowaves in this band are held under old licences, which will start expiring from November 2014.

Operators such as Bharti Airtel and Vodafone are keen to buy back this spectrum to continue their services.

Vodafone, for instance, needs to buy back spectrum in Delhi, Mumbai and Calcutta; Airtel in Delhi and Mumbai.

Boost for rupee

Movements in the currency market suggest that the bidding will be intense.

While emerging market currencies dropped because of the recent cut in stimulus by the US Federal Reserve, the rupee gained because of late buying by banks fronting for telecom companies.

The rupee opened at 62.71 per dollar against the previous close of 62.67 because of the strong demand for dollar from oil importers and foreign institutional investors who have been net sellers on the Indian bourses.

However, buying by banks pushed the rupee up to close at 62.57 against the dollar.

The 3G auction in 2010 lasted for 34 days. In November 2012, the auction lasted for only two days because of a high reserve price combined with a weak telecom market; about Rs 9,400 crore of bids were received for spectrum worth Rs 28,000 on offer.

Another attempt in March 2013 lasted for just one day.

The government had set a target of Rs 40,874.50 crore for this fiscal from the spectrum sale, including the auction amount, one-time spectrum charge and annual licence fee.