A crucial change in auctioning 2G spectrum compared with the 3G spectrum auctions two years back will ensure that bids will not go very high this time.
Sources said the change in the design has been done by the auctioneer in consultation with the government, since after the 3G auctions, the industry had complained that the design structure had forced them bid very high.
However, government sources said the reserve price at R14,000 crore is high enough for the government not to lose revenues because of the change in design.
The change relates to the closing rules of the auction, which allows an operator who has become a provisional winner in a circle to return at any stage and bid if there?s a price increase.
This was not the case in 3G auctions, where prices kept rising till the time the supply of spectrum in a circle did not turn negative. An operator who opted out of the bid in a round did not have the luxury to come back at a later stage.
While this time too the design will be clock auction where bidding will be done simultaneously for all the 22 circles, the difference will be in the closing rules which have been relaxed to allow a bidder to return to the auction at a later stage even if it pulls out of one round.
Due to the lack of this option in the 3G spectrum auction, Bharti Airtel had lost out in the Punjab circle where it had emerged as a provisional winner and did not bid in the subsequent round expecting there would be no more bids. However, to its surprise, since the demand in the circle had not become negative, the price increased and Bharti was not allowed to re-enter the bid.
In the forthcoming auctions, even if demand across all the 22 circles reaches the supply of the spectrum, the price can be increased again. Only if no fresh bids come would the auction come to an end.
Going by the change in the design of closing rules, the auctions would continue longer than it did in the case of 3G. However, since the number of players are expected to be limited this time unlike in the case of 3G, in practice the auction should not take a very long time to close.
