Day VI of auction sees moderation in spectrum bids, kitty dips to Rs 92,200 cror

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Via The Economic Times | Mar 11, 2015
In a first, bid levels for the spectrum auction fell by around Rs 2,000 crore to
close Tuesday at Rs 92,000 crore, as steep prices in the key 900 Mhz band force
d operators to reduce the amount of airwaves they were vying for, thus leaving s
ome spectrum unsold and reducing revenue assured for the government. "In the auc
tion design, over rounds, with increase in price, sometimes lesser number of blo
cks are provisionally allocated at a higher price, and thus the total amount may
fluctuate a little," a senior telecom department (DoT) official explained. "How
ever this tends to even out over a few rounds of bidding." So, while provisional
winning price for the 900 Mhz band in some circles increased due to continued i
ntensive bidding, the total spectrum, which have been provisionally, sold fell.
"There was activity in two new service areas in 1800 MHz band. There is a shift
in activity from 2100 MHz and 900 MHz bands to 1800 MHz and 800 MHz bands. At pr
esent, over 83 percent of the spectrum has been provisionally allocated to bidde
rs at a value of approximately Rs 92,200 crore (after 37 rounds of bidding)," ac
cording to a telecom department statement. DoT added that a majority of service
areas were going at a premium over reserve price and with activity in new servic
e areas, competitive bidding is expected to continue, with some spectrum yet to
be sold.
Analysts and operators criticised the auction design, which permitted some to bi
d for lesser amounts of airwaves than others, thereby creating an imbalance. For
instance, a new entrant/licensee whose licence is expiring in 2015-16 or existi
ng licensees whose licence are not expiring in 2015-16 and who hold spectrum onl
y in 1800 MHz band are allowed to bid for a minimum of 5 MHz of spectrum in the
900 MHz band, except in West Bengal service area, as per rules. Those whose lice
nses are not expiring in 2015-16 and who hold 900 MHz band in a service area are
allowed to bid for a minimum of 0.6 MHz. Due to the way the auction rules treat
s existing players versus versus new entrants, "the price per block goes up from
one round to next but the quantity of allocated spectrum goes down - this resul
ts in the overall realization in a clock round being lower than that in the prev
ious clock round," said Pankaj Agrawal, director at advisory firm Capitel Partne
rs. Another analyst, who declined to be named, said he hadn't seen a funnier auc
tion design. "Operators won't want to spend extra in any single Mhz they are not
required to bid for. Some spectrum in 900 Mhz will remain unsold even if overal
l price has increased," he said. "What a bizarre way to waste precious spectrum.
"
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