Next round of 2G auctions on Jan 23

Written by fe Bureau | New Delhi | Updated: Dec 14 2013, 08:57am hrs
The department of telecommunications (DoT) has issued a notice inviting applications (NIA) from potential bidders to buy 2G spectrum in the auction starting January 23.

With reserve prices slashed by 50% compared to the rates fixed for the failed March auctions, the government is betting on earning over Rs 40,000 crore from sale of airwaves to counter a steep fiscal deficit.

On a positive note, the NIA that provides details on auction rules --- allows for the sharing of liberalised spectrum without any additional one-time charge. It also gives an in-principal approval for trading of radiowaves.

The NIA also states that contiguous radiowaves or spectrum without a break needed to offer data services would be granted only to those players who bid for 5Mhz of spectrum or more. Moreover, the allocation of contiguous spectrum would be based on a ranking system whereby bidders would be ranked in the descending order of bids made in the clock round (actual auction round) for each service area.

However, in the absence of detailed guidelines for spectrum sharing and trading, industry players said it will impact their bidding propositions. This was a critical part of any operators' bidding strategy and may have an impact on the pan-India versus circle wise price points, said Hemant Joshi, senior partner, Deloitte. Earlier, Trai had proposed spectrum trading for all bands of radiowaves between mobile service providers.

Total spectrum being put up for auction in the 1,800 Mhz band is 403.2 Mhz across all 22 telecom circles while in 900 Mhz band the quantum is 46 Mhz in Delhi, Mumbai and Kolkata.

Although, the 900 MHz and 1800 MHz band airwaves together is valued at Rs 48,685 crore, if companies opt for a deferred payment the government will be able to get only about Rs 15,200 crore this fiscal from sale of airwaves, said analysts.

As per the NIA, a successful bidder in 1,800 Mhz band has the option to pay 33% of the total price upfront with the balance amount to be paid in 10 equal annual installments after a moratorium of 2 years. For winners in 900 Mhz band, the upfront payment is 25% of the total bid price.

The auction rules also state that the promoter of a telecom company, whose share capital is 10% or more, cannot sell his stake in the company before completion of three years from date of allotment of spectrum or fulfillment of all rollout obligations (whichever is later). However, the NIA states that this is subject to revision in accordance with guidelines on trading of spectrum when issued.

The empowered group of ministers (EGoM) on telecom had decided to send the matter to the Attorney General of India for legal consultation.

The lock-in period had been introduced to prevent fly-by-night players from making windfall gains by selling spectrum at market price after acquiring spectrum from the government under the first-come-first-served policy.

However, since fresh spectrum allocation is being done only through auction and older players who had got spectrum under the earlier dispensation have completed more than three years, the DoT had initially decided that the lock-in period was not necessary.

New companies will have to bid for minimum of 25 blocks of airwaves (each block size is of 200 kilohertz) amounting to 5Mhz in 1,800 Mhz band. Existing players will be required to bid a minimum of 3 blocks of airwaves in this band. In 900 Mhz band, each bidder will be required to bid a minimum of 5 blocks (each block size is of 1 Mhz).

A company will be treated as new entrant in a service area where it does not hold spectrum. Moreover, bidders like Airtel, Vodafone and Loop Mobile "whose licences are due for expiry in 2014 and their spectrum put to auction will also be treated as new entrants" for making bids in 900 Mhz band.

A company (in both band categories) can hold up to 25% of spectrum assigned to all companies in a service area and up to 50% of airwaves (allotted to all companies) in a particular band assigned in a service area, the NIA said.