Spectrum auction prices hot up in 900 MHz in metros, but bidders thinning out

Written by fe Bureau | New Delhi | Updated: Feb 5 2014, 06:52am hrs
Spectrum auctionThe next auction held in March 2013 saw only one participate. Reuters
The second day of the auctions for 2G spectrum was marked by aggressive bidding for 900 MHz spectrum in the Delhi and Mumbai circles, with Kolkata also attracting strong bids. However, demand has started waning, with bidders deeming the price high, as a result of which aggregate demand in all three circles came down on Tuesday, with Delhi registering a drop of more than 50%.

Going by Tuesdays closing bid price, the government has secured Rs 44,635 crore, up 5.4% from Mondays closing amount. Even if companies pay by the deferred mode (one-third upfront, rest in 10 instalments), the government has already made Rs 14,878 crore, crossing its Budget target of Rs 11,000 crore.

By the end of the second day, bids had gone up to Rs 19,894 crore for the three metros Delhi, Mumbai and Kolkata in the 900 MHz band, up 18% from Mondays close. The average bid price for the three circles was 55.9% higher than the reserve price.

In the 1800 MHz band, all 22 circles put up for sale received bids to the tune of Rs 24,741 crore, down 2.9% from Mondays close.

A total of 14 bidding rounds have been conducted in this auction, with eight rounds on day two.

On Monday, the auction had got off to a flying start with bids worth around Rs 42,000 crore after seven rounds. In 1,800 MHz band, Gujarat and Uttar Pradesh (West) circles saw demand higher than the spectrum blocks available in these circles. While the bid price at the end of the second day for Gujarat was 18% higher than the reserve price, UP (West) saw its bid price rise 14% over the base price. Assam and Bihar were the other two circles where the bid price was higher than the reserve price. In all other circles, the bid price remained at the base price level.

Each bidding round lasts around an hour, but can be extended by up to four hours by any of the bidders. Talking about the apparent success of the auction, telecom minister Kapil Sibal said: We took the bold step of rationalising reserve prices. On the first day itself, we got bids worth Rs 40,000 crore... It's a matter of great satisfaction that we have turned around a sector which was working in an environment that was exceptionally negative.

Rahul Khullar, chairman, Trai said: We had to choose a different path after two unsuccessful auctions and the demand shows that we are getting the right price.

This is the third time the government is auctioning 2G spectrum after a two-day auction in November 2012 and another one in March last year that lasted a day. The November 2012 auction had seen the government earning only Rs 9,407.64 crore against expectations of Rs 28,000 crore since operators claimed reserve prices were too high. The next auction held in March 2013 saw only one participate, submitting bids worth Rs 3,639 crore.