On April 9, India would commence the auctions for 3G spectrum, one of the largest-ever such auctions in the telecom space. This includes the auction for broadband wireless access spectrum. The two auctions, because of the scale and complexity of the exercise, would be quite different from similar auctions held elsewhere in the world so far.

Designed by NM Rothschild and DotEcon along with the Department of Telecommunications, the entire multi-stage bidding would be conducted online, where participants can log on from anywhere in the world. FE gives you a preview of the entire process that aims at absolute transparency and yet ensures the government earns the maximum possible revenue from the exercise. This model of auction will be different from the ones held in European countries where bidders made astronomical bids leading to business failures later.

The reserve price for the all-India bid is Rs 3,500 crore and the government expects to mop up a minimum of Rs 35,000 crore through the process, which would see three players emerging winners in 17 circles and four in the remaining five.

This is how it would begin: Let?s take the case of a circle where six operators are bidding. The auctioneer would open the auction with the reserve price for a circle, for example, Rs 320 crore for Delhi . If all the six operators bid for it, DoT would increase the bid amount by 10%. The scale of price increase is pre-defined at each stage. The process would go on till the difference between number of bidders and slots is less than three. Once that happens, DoT would keep on hiking bid amount by 5% till the difference between the number of slots and the bidders is one. This would mean that for three slots, four operators are in the fray. At this stage, the DoT would increase the bid amount by 1% till there?s equilibrium, which leaves three operators for three slots. However, at no stage will a bidder know anything more than the numbers left in the fray.

Mind you, the auction is not over yet. Auctions for all 22 circles are happening simultaneously; so the ones who pull out, can transfer their bid amount to another circle, say Kerala.

The auction doesn?t stop even when certain circles reach equilibrium. This means that if, for instance, even if the number of slots equals the number of bidders in all the circles except for one, DoT will continue to increase the bid amount by 1% even in the circles which have reached equilibrium till the remaining one circle also reaches the level of equilibrium. To illustrate, if the equilibrium is reached in all the circles except, say Mumbai, the increase of the bid amount by 1% would continue in all other circles till equilibrium is reached in Mumbai.

The auction, however, will stop in a circle where by this process of increasing the bid amount by 1% even after equilibrium lead to a bidder pulling out as a result of which the number of slots exceeds the number of bidders.

The open ascending auction will allow each bidder to bid with a minimum time frame of 20 minutes for each price point. There is also something called the activity factor, which the auctioneer will assign to every bidder and depending on it, a bidder can choose to remain silent for some time in certain circles, even while keeping its options alive there. Each day from April 9, the auction will remain open from 9 am to 730 pm on all working days.

Once the 3G auctions close this way, the same process would be emulated for the auction of broadband wireless access where 11 players are in the fray.

In the case of India , the government controls the price, whereas in other nations, the players were raising the bid amount by outbidding each other.

The reserve price for metros and category A circles is Rs 320 crore, for B circles it is Rs 160 crore and for C circles Rs 80 crore.

For instance, in the auction for 3G, out of the country?s nine mobile operators, six would be bidding for pan-India ? 22 ? circles.

Six operators ? Bharti Airtel, Vodafone-Essar, Reliance Communications, Tata Teleservices, Aircel and Idea Cellular are bidding for all 22 circles, while Etisalat DB, Videocon Telecom and STel are bidding for select circles.