2G auction proves a damp squib on Day 1

Last Updated: Tue, Nov 13, 2012 06:19 hrs

The much-awaited auction of the 1,800-MHz band 2G spectrum has received a muted response from telcos, with the government managing to rustle up only Rs 9,224.75 crore at the end of the seventh round of bidding today. The auction will resume on Wednesday.

At the end of seven rounds of bidding, the provisional winning price in 17 of the 22 circles remained the same as the base price fixed by the government.

However, the provisional winning price for the Bihar circle increased by Rs 1.7 crore over the reserve price. The Delhi and Mumbai circles (which account for 40 per cent of the total base price for a pan-Indian licence), besides the Karnataka and Rajasthan circles, found no bidders till the seventh round of bidding. This means, in these circles, the government will not even be able to determine a one-time fee that incumbent operators have to fork out for excess spectrum, as there would be no auction-discovered price.

Going by today's trend, the government would get only a little more than Rs 3,000 crore as proceeds from the auction this financial year, since operators have to pay only a third of the auction price upfront.

Given the poor response, the government's ambitious target of mopping up Rs 30,000 crore from 2G auction and one-time fees looks to be going awry. Analysts say, if things don't change dramatically on the second day of auctions, the government won't be able to get more than Rs 10,000 crore this financial year from auctions and one-time fee.

DoT officials said after the fifth round that only 55 per cent of the 176 blocks of 1.25 MHz spectrum in 18 of the 22 circles got bidders. This means the government will be left with a lot of spectrum that will go unsold. If all spectrum put on the block had been auctioned (even at the base price of Rs 14,000 crore for five MHz), the government would have got over Rs 37,000 crore.

The clamour for a re-auction has already started. Cellular Operators Association of India Director-General Rajan Mathews says: "Our stand is vindicated; the base price was too high for telcos. I think the government miscalculated the price. It should look now at cancelling the auction, recalibrating the base price and going for fresh auctions."

Five telcos - Bharti Airtel, Vodafone, Telenor-promoted Telewings, Videocon and Idea Cellular - had participated in the bids today. Telenor is believed to have bid for eight circles but not Mumbai, despite the fact that it has subscribers there.

Based on aggregate bidding data with the government at the end of the seventh round, of the eight blocks up for auction, only five blocks in the Maharashtra circle came up for bidding. In Madhya Pradesh, Jammu & Kashmir, Odisha, Haryana, Northeast and West Bengal, bidding was for six blocks, while it was for seven in Assam; and four blocks of 1.25 MHz each in Kolkata, Tamil Nadu and Andhra Pradesh.

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