Spectrum Auction Gets Bids Worth Rs 63,451 Crore On Day 4
Spectrum auctions: 700-900 MHz bands still remain unsold.
The spectrum auction on the fourth day ended with total bids worth Rs 63,451 crore, an increase of only 4 percent over the third day according to a media statement by the Department of Telecommunications (DoT). There were six fresh rounds of bidding taking the total number of rounds to 23.
The statement says the government is likely to receive an upfront payment of around Rs 31,000 crore, which is significantly below the budgeted proceeds of Rs 60,000 crore during financial year 2016-17. Telecommunication companies are required to pay part of the spectrum cost upfront and the rest over a period of 10 years.
Companies Focus on 4G Footprint
The 2300, 2500 and 1800 MHz bands, which are 4G bands, emerged as the most sought after ones. The auction saw companies focus on boosting their data services footprint, bidding for the entire 2300 MHz band spectrum on sale, 68 percent of the 1800 MHz band, and 33 percent of the 2500 MHz.
The high-cost 700 MHz and 900 MHz bands continued to see no demand, even on day four.
The 2100 MHz band, which is a 3G band, received bids mainly in low data penetration markets - B and C circles. There are 22 circles in India – classified as metro, A, B and C based on how developed the markets are in terms of data usage.
While the provisional winning price or the bid price was higher than the reserve price in a few circles, overall premium remained limited due to ample spectrum availability across all bands.
Excess Demand Seen In 1800 MHz
Among the 4G bands, telecom operators bid for the entire available spectrum in the 2300 MHz band. However, the price escalation in 2300 MHz was limited to a mere 4 percent. The auction saw companies bid for 2500 MHz spectrum whenever demand for 2300 MHz exceeded supply. As a result, 33 percent of the 2500 MHz band was bid for on day 4 across 12 circles.
In the 2300 MHz band, the highest premium was won in the Gujarat circle where the provisional winning price was 58 percent higher than the reserve price. Officials in telecom companies suggested this could be on account of demand from Bharti Airtel and probably Vodafone but BloombergQuint was not able to confirm that information.
In the 1800 MHz band, the two most sought after circles were UP East, the only circle in which demand exceeded supply, and Mumbai which saw the highest premium in this band at 49 percent over the reserve price. While bid data is not publicly available, this could be on account of Tata Teleservices (Maharashtra) needing to renew its spectrum in this circle and Idea Cellular may be looking to beef up 4G capacity, said industry insiders. Tata Teleservices’ spectrum comes up for renewal in 2017 and the company has to bid for spectrum in Mumbai to retain customers.
Only 20 percent of the total supply of 800 MHz spectrum was bid for and the activity was limited to four circles - Gujarat, Punjab, Rajasthan and UP (East). All four saw provisional bid price in excess of the reserve price. Analyst reports had anticipated Reliance Communications, Reliance Jio and Tata Teleservices to be active in these circles as these companies are short of spectrum in the 800 MHz band. The provisional bid price for Gujarat was at an 18 percent premium to the reserve price; for Rajasthan it was at a 12 percent premium to the reserve price.
In the 2100 MHz band – or the 3G spectrum band – bids were made for a total 5-10 MHz of spectrum in 11 circles. However, abundant availability in each circle prevented any price increase. Eight of these 11 circles are of the B and C categories that have lower data penetration.
The 900 MHz, which also can be used for 3G, did not see any demand mainly due to limited availability of spectrum.
Industry watchers say bidding and demand has peaked in most circles which could mean that the auction is likely to end soon.