Spectrum bids outstrip govt target at Rs82,000 on 4th day

The biggest-ever auction of 2G and 3G spectrum got bids worth Rs86,000 crore at the end of Saturday, the fourth day of bidding. The auction has already crossed the government's targeted minimum amount of Rs82,000 crore based on reserve prices.

At the end of the fourth day, 24 rounds of bidding had been completed, with aggressive bidding seen in the 900 MHz band. The price for 900 MHz settled 85 per cent higher against its reserve price, while price of other three bands (800/1800/2100MHz) rose only by 2-6 per cent at the end of the fourth day.

"Bidding has taken place in all bands. At present, a value of approximately Rs86,000 crore has been committed by bidders in respect of provisionally won spectrum. Bidding would recommence on Monday," the Department of Telecom said on Saturday.

Last year, the government raised Rs612 billion from sale of airwaves. This year's auction includes 20 circles covering 1.1 billion people.

Most of the spectrum being put up for the auction is currently held by Airtel, Vodafone, Idea Cellular and Reliance Telecom. As many of their permits in different circles are expiring, it is necessary for these companies to renew their spectrum.

Mobile licences for Idea Cellular's nine circles, Airtel's six, and seven circles each of Vodafone and Reliance Telecom are coming up for renewal. Overall 29 licences in 18 service areas will expire in 2015-16.

Eight companies are in the fray, including Reliance Jio, the telecom arm of Mukesh Ambani-led Reliance Industries that is the new kid on the block.

Bharti Enterprises chairman Sunil Mittal has indicated that the auction might put pressure on the financials of the telecom companies and this might lead to a rise in tariffs. "It (spectrum auction) puts pressure on balance sheets... may result in rise in tariff," the head of India's top telecom operator said.

Successful bidders have to make an upfront payment of 25-33 per cent of the final sale price. This could garner nearly Rs25,000 crore for the government immediately.

Spectrum prices in India are among the highest in the world, even though services remain dismal as the government releases the spectrum in dribs and drabs.

Eight telecom operators have deposited Rs20,435 crore as earnest money for the auction. Reliance Jio has paid the highest deposit of Rs4,500 crore, followed by Rs4,336 crore from Bharti Airtel.

The government is selling 380.75 MHz of 2G spectrum in three bands - the premium 900 MHz band, 1800 MHz and 800 MHz. Also, 5 Mhz in the 2100 Mhz band, or 3G spectrum, has been put up for auction.

The government had set a base price of Rs3,646 crore per MHz for the 800MHz spectrum band, Rs3,980 crore for 900MHz band (excluding Delhi, Mumbai, Kolkata and J&K where they are higher, Rs2,191 crore for the 1,800 MHz band and Rs.3,705 crore for 2,100 MHz spectrum band.