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Day four of telecom spectrum bids brings in Rs 86,000 crore

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MUMBAI: While the government had set aside a reserve base price of Rs 49,000 crore for the ongoing auction of wireless spectrum, it has already received a massive Rs 86,000 crore from a total of 24 bids till 7 March. While some spectrum slots saw strong competitive bidding, other slots are yet to see the bidding, according to reports.

The spectrum auction is being conducted for airwaves in the 2100, 1800, 900 and 800 MHz bands. The validity of the spectrum is for a period of 20 years.

When compared to last year’s February 2014 auction, the government had received total bids of over Rs 62,000 crore. In the ongoing auction the first day itself collected Rs 60,000 crore!

This figure further rose to Rs 66,000 crore on 5 March, followed by Rs 77,000 on 6 March. Day four on 7 March meanwhile saw bids touching a massive Rs 86,000 crore. This figure is easily expected to touch to Rs 1 lakh crore on 9 March. The amount will vary depending on how much these telecom companies are willing to spend to hold on their present spectrum in the vital 900 MHz band. Companies will also keep an eye on 3G spectrum in 2,100 MHz band. The bands of 2,100 MHz is up on sale with a reserve price of Rs 3,705 crores per MHz. The two bands that may witness the highest bids are 800 MHz with reserve price of Rs 3,646 crores per MHz and 900 MHz with reserve price of Rs 3,980 crores. Besides, the government has fixed the reserve price at Rs. 2,191 crores for 1,800 MHz band.

According to a statement by Fitch Ratings, telcos are likely to cough at least $13 billion in the auctions - over 75 per cent of which is likely to be contributed by the top-four telcos i.e Bhararti Airtel, Vodafone India, Idea Cellular and the newest entrant Reliance Jio.

The top-three telcos - Bharti Airtel, Vodafone India and Idea Cellular could cough up around $2.5 to $4.5 billion each to renew their expiring spectrum in six, seven and nine Indian circles respectively. On the other hand, Tata Teleservices and Uninor may either bid for few 3G frequencies or try and broaden the range of their 2G spectrum. Idea has been pushed to the wall clearly as it needs to retain its existing spectrum, which is expiring in circles that contribute around 70 per cent of its annual revenue.

Similar revenue contributes 45 per cent and 35 per cent of annual Indian revenue for Vodafone and Bharti, respectively. If these companies want to continue offering their services it is mandatory for them to bid for their spectrum as their permit is expiring in 2015-2016.

The ambitious Reliance Jio project, part of Mukesh Ambani owned Reliance Industries, which plans to roll out its services in 2015 with an investment budget of $12 billion, is likely to fill its spectrum gaps in the 1,800MHz band. The Fitch report feels Jio will probably focus on data services using "long-term evolution" technology, with its ownership of 1,800MHz spectrum in 14 circles and a pan-India spectrum in 2,300MHz. However, as occasionally seen in the earlier auctions, Reliance Jio could push up the spectrum price in 900MHz for other telcos, if it chooses to do so, as the auction mechanism hides the identities of participants.

According to data by the Department of Telecommunications, Assam is the hot favourite with access demand in three circles it is available. Gujarat, Maharashtra, the North East, Punjab and Odisha circles are most sought after in the 800 MHz segment while West Bengal and Himachal Pradesh circles are a hit in the 900 MHz segment.

The total spectrum that the government put up for auction is 103.57 MHz in the 800 MHz band, 177.8 MHz in the 900 MHz band, 99.2 MHz in the 1800 MHz band and 85 MHz in the 2100 MHz band.

The eight telcos battling it out are Bharati Airtel, Vodafone India, Idea Cellular, Reliance Communications, Telewings Communications (Uninor), Aircel, Tata Teleservices, and Reliance Jio.

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