Spectrum auction: Bids for some 900 MHz circles cross 2010 record

Written by ENS Economic Bureau | New Delhi | Updated: Feb 10 2014, 19:46pm hrs
Spectrum auctionMost telcos are draining out cash from their war chest far more than they had bargained for in the spectrum auction.
BIDS by telecom companies for spectrum in the prized 900 MHz band has crossed the money they paid for in 2010 auctions.

At the end of the sixth day of auctions, the companies have almost doubled the sum they paid for the airwaves in Kolkata (see chart) at 178 per cent. The money put on the table for the Delhi circle too has reached over 110 per cent of the bid amount in 2010.

With the battle toughening for these circles, analysts said the same would happen for the 1800 MHz circle.

spectrum auction

From the government revenue perspective this is great news as one finance ministry official put it. Meeting the fiscal deficit target for FY14 is now a certainty, he said.

But the worry is that most of the companies are draining out cash from their war chest far more than they had bargained for. While the sum at the end of the sixth day of auctions has not jumped up as fast as they did in the first two days, it is still drawing close to the Rs 67,000 crore the government made in the earlier auction. Bids for at least Rs 56,600 crore are already on the table.

A telecom department source said the higher money is expected to impact the profitability of the incumbent telecom companies. There are currently eight companies in the fray for this auction. A public sector bank said at least one of the company has checked out further borrowing options from them over the weekend.

The official said the higher price for the winning bid means the companies would have to raise the price of their services, which in effect neutralises the advantage for the government in realising higher revenue for selling spectrum and some sell out from the sector.

The companies are expected to bid stiffly for 1800 MHz too as these will not be available for at least another 20 years (new licence period). The price of unexplored circle like Assam has risen 2000 per cent over the reserve prices and even that of Jammu & Kashmir has crossed 22 per cent over that of reserve price, set by the Telecom Regulatory Authority of India.

The current auctions the fourth held by the telecom department since 2010 will come to an end only when the excess demand for all 22 circles is extinguished simultaneously at the end of any round.

The possibility of this happening soon looks difficult, said the telecom department official. The second and third auctions were washouts.