Pan-India 3G slot receives 99% higher bids than reserve price

As the 3G spectrum auction enters its 12th day on Friday, operators would have committed double the amount of the government set reserve price of Rs 3,500 crore. On Thursday the pan-India bid for one slot ended at Rs 6,968 crore, which is 99% higher than the reserve price.

Total revenue of Rs 28,228 crore of the budgeted Rs 35,000 crore accrued to the government on Thursday. Though the industry is not surprised with the jump in the auction, few analysts feel that such high bids could dilute the margins of the spectrum winning operators. Manoj Mohta of Crisil Research had earlier told FE that ?if the bid close beyond Rs 6,200 crore it would be margin diluter, exerting pressure on the operating margins of the companies?.

Analysts feel that the 3G spectrum auction will easily close around Rs 30,000 and going by the pace of the 3G spectrum auction, the wireless broadband auction will go well beyond additional Rs 10,000 crore, taking the auction proceeds to more than Rs 40,000 crore. The communications & IT minister A Raja has already said that the government has revised its auction estimates from Rs 35,000 crore to Rs 45,000 crore.

The auction began on April 9 with Delhi circle attracting the highest bid but in between the Gujarat circle became the favourite with the telecom operators. On Thursday the provisional bidding amount, which means the till date revenue accruing to the government from one slot in Delhi was Rs 850 crore. This is 165% higher than the reserve price of Rs 320 crore for Delhi circle. Mumbai circle is the second most sought after with the provisional bid amount of Rs 752 crore.

Currently, the metros and category A circles are experiencing aggressive bidding as the level of activity of the auction is only 80%, this means that the operators are allowed to focus on their main target areas which are predominantly the category A circles. Once the government raises the level of activity to 90% the operators will then be signaled to start focusing towards the other category B and C circles and the 3G spectrum auction will soon come to an end.