Day 4: Spectrum auction gets bids worth Rs 63,500 crore

New Delhi: Spectrum auction on Day 4 ended with a meagre addition of Rs 2,531 crore, taking total bids to over Rs 63,500 crore as almost 60 percent of airwaves, including the premium 4G bands of 700 Mhz and 900 Mhz, remained unsold.

At the end of the fourth day, government received commitments for little over 40 percent of the total spectrum put on the block. As much as 2,354.55 MHz of frequencies valued at Rs 5.63 lakh crore at the base price have been put up for auction across seven bands.

"Bids worth over Rs 63,500 crore have been received till the end of 23rd round for 956.8 Mhz spectrum, out of total 2,354.55 Mhz put for auction," an official source told PTI.

Bidding will resume tomorrow at 1000 hrs with the duration of each round shrinking to 45 minutes from 60 minutes, the source added.

According to the bid document, the duration of each bidding round is reduced when the number of slots put up for auction, falls below 10 slots. The government had put up 126 slots on the offer in the current spectrum auction, which was touted to be as the largest spectrum auction ever.

Yesterday, the auction had witnessed an additional bidding of Rs 4,097 crore taking the commitments at the end of the third day to Rs 60,969 crore.

Seven telecom companies -- Bharti Airtel, Vodafone, Idea Cellular, Reliance Jio, Aircel, Reliance Communications and Tata Teleservices -- are in the fray for acquiring 3G and 4G spectrum, crucial for maintaining competitive edge in the market and offering next generation services in the world's second-largest telecom market.

There is no demand yet for frequencies in 700 MHz and 900 MHz bands, while bidding interest has been seen largely around 1800 MHz and 2300 MHz that can be used by operators to provide 4G services. 

The debt-ridden telecom industry has been cautious in this auction, filling its coffers with low priced spectrum that will help them in improving mobile service quality.

As per rating agency ICRA, the consolidated debt level of the industry stood at around Rs 3,80,000 crore in December 2015 against Rs 2,90,000 crore in March 2014.

So far, industry has shown interest in 1800 Mhz (2G/4G) band, 2100 Mhz (3G/4G) band, 2500 Mhz (4G) band, 2300 Mhz (4G) and 800 Mhz (2G/4G).

The Finance Ministry in the Budget pegged the revenue target at Rs 98,995 crore from the telecom space. This included Rs 64,000 crore from the auction.

The premium 700 MHz band alone has the potential to fetch bids worth over Rs 4 lakh crore if the entire spectrum in this band is sold at the base price. However, at a reserve or base price of Rs 11,485 crore per MHz, it is considered to be priced very expensive in spite of its inherent advantages in terms of propagation ability and potential savings.

The government has fixed a pan-India reserve price of Rs 2,873 crore per Mhz for spectrum in 1,800 MHz band; Rs 3,341 crore for 900 MHz; Rs 5,819 crore for 800 MHz; Rs 3,746 crore for 2,100 MHz; Rs 11,485 crore for 700 MHz and Rs 817 crore each for 2,300 MHz and 2,500 MHz bands.

The higher the frequency, the lower is its pricing as coverage and efficiency tapers with increase in spectrum band value.

According to data issued by Telecom Department, during the bidding today excess demand was seen in Rajasthan in the 800 Mhz band, and in Uttar Pradesh (East) in the 1800 Mhz band, both of which are used for 2G as well as 4G services.

When the auction commences tomorrow, it will do so with price increments in circles of Rajasthan in 800Mhz band, and Mumbai and UP (East) for 1800 Mhz band.

The Mumbai telecom circle is said to be witnessing a fierce fight between Tata Teleservices and Idea Cellular for 1800 MHz band, while Reliance Jio, Vodafone and Bharti Airtel are understood to be slugging it out in UP (East) for 1800 Mhz band.

With its licences in Mumbai, Maharashtra, and Andhra Pradesh slated for renewal in September next year, Tata Teleservices is locked in a battle to defend its existing spectrum holding in the said circles.

Meanwhile, the industry is of the view that the auctions have entered the last lap.

"The operators are clearly looking to plug the coverage gap in their 3G footprint," said Prashant Singhal, Global telecom leader of consulting firm EY.