Spectrum auction to begin on Feb 3

Bharti Airtel, Vodafone, Reliance Jio Infocomm and five other telecom firms will battle it out at the spectrum auction on Monday, from which the government expects to garner at least Rs 11,300 crore (Rs 113 billion).

The Department of Telecom has put on the block around 385 MHz of radiowaves in the 1800 MHz band, and 46 MHz in the 900 MHz band.

DoT has reduced the quantum of spectrum to be sold in 1800 MHz band in 10 circles, including Delhi, Kolkata and Mumbai, from about a total of 403 MHz planned earlier.

The final list of bidders also includes Idea Cellular, Telewings (Uninor), Reliance Communications (RCom), Tata Teleservices and Aircel.

Three companies, meanwhile, have been found to be ineligible for bidding in certain service areas. Vodafone India will not be able to bid in seven circles, RCom in eight and Tata Teleservices in Delhi.

The government has to conduct this third round of spectrum auction following a Supreme Court order in 2G case directing that all the radiowaves freed from the cancellation of 122 licences in February 2012 should be auctioned.

Besides, 900 Mhz has to be auctioned as some of the radiowaves in this band are held under old telecom licences which will start expiring from November 2014. In November 2012, bids worth Rs 9,407 crore were received for spectrum worth Rs 28,000 that was offered.

In March 2013, no GSM operators bid at the auction and only CDMA operator Sistema Shyam bought spectrum of about Rs 3,600 crore in eight of the 21 service areas.

It is must for Vodafone to get spectrum in Delhi, Mumbai and Kolkata; for Airtel in Delhi and Mumbai, and Loop Mobile in Mumbai for continuing operations because their licences are expiring in November.

The government has fixed the base price for sale of spectrum in the 1800 Mhz band for pan-India at Rs 1,765 crore per MHz, about 26 per cent lower than in the March sale.

For 900 MHz band, the base price is 53 per cent lower than the previous auction price. It is Rs 360 crore per MHz for Delhi, Rs 328 crore for Mumbai and Rs 125 crore for Kolkata.

The government is hopeful that all the spectrum put on auction table would be sold out. "We are very confident that these auctions are going to be successful and we are very confident all the spectrum that is to be auctioned will be sold," Telecom Secretary MF Farooqui had said.

The government has set a target of Rs 40,874.50 crore for this fiscal from spectrum, including the auction amount, one-time spectrum charge and annual regular licence fee.

In its bid to improve the bidding sentiment, government has decided on the key issue of spectrum usage charge (SUC).

The Cabinet has approved charging telecom firms 5 per cent of their revenue as SUC for new radiowaves whereas for existing spectrum, the weighted average of SUC will apply.

Operators had sought clarity on SUC ahead of the auction after the Telecom Regulatory Authority of India (Trai) had recommended a rate of 3-5 per cent for all players.

For the auction, a new operator has to submit a minimum bank guarantee of Rs 1,918.75 crore (Rs 19.18 billion) if it plans to bid for pan-India spectrum in the 1800 MHz band.

For the scarce 900 MHz band, companies were required to deposit Rs 438.75 crore as minimum earnest money if they want to bid in all three metros - Delhi, Mumbai and Kolkata.

Successful bidders can pay the part of the money upfront and the remaining amount over a maximum of 10 yearly instalments.