Need For Auction

Prime Reason

• 2G spectrum had to be auctioned afresh after the Supreme Court ordered in 2012 the cancellation of 122 licences issued in 2008 by then Telecom Minister A Raja.

• The Supreme Court held that the process used by him to allot licences was "illegal" and ordered a new auction.

• Auctions in November 2012 and March 2013 flopped as most bidders stayed away from the sales, complaining that the floor bid prices were too high.

• The eight bidders applied to participate in the current auction after the government sharply cut auction reserve prices

The Participants

Why 2G Auction worked this time

• The reserve fee must be set as low as possible — just high enough to cover the basic cost of the resource, but low enough for it to attract as many bidders as possible. That's what the government managed this time. As telecom minister Kapil Sibal told this paper, "We took the bold step of rationalising reserve prices.

• To be sure, DoT has lowered reserve fees after each failed round. When it started auctions for 1800 MHz spectrum in November 2012, it kept the reserve fee at an eye-popping Rs 14,000 crore for a 5 MHz pan-India block.

Cont...

• As a result, bidding was lacklustre earning for the government just Rs 9,704 crore. There were no bids in the four major circles of Delhi, Mumbai, Karnataka and Rajasthan. Worse, there were no bids received in the 800 MHz spectrum

• In the present round, DoT was forced to reduce the reserve fees further. The 1800 MHz reserve fee was lowered by a further 26% and the 900 MHz one by 50%. It's a result of these reductions that the auctions are seeing traction.

Results of Auction

• At Rs. 61,162 crore, the government's total revenue from the auction is much higher than its initial estimate of about Rs. 41,000 crore.

• The licences won today will be valid for a period of 20 years. The companies need pay only a quarter to a third of the winning auction price upfront and the remainder through to 2026.

Cont...

• Eight companies, including Bharti Airtel, Vodafone, and Reliance Industries Ltd, had applied to bid in the auction of 900 megahertz and 1800 megahertz band airwaves. The 900 megahertz band was auctioned only in three cities - Delhi, Mumbai and Kolkata

• In the 1800 MHz band, Airtel won in 15 circles, Vodafone in 10 and Idea in 11.

• The Mukesh Ambani-backed Reliance Jio bagged 1800 MHz band in 14 circles out of the 22 on offer. This will help the company to not only offer data but also voice services in these regions. Reliance Jio had earlier won the rights to offer 4G broadband services across the country

Cont

• At a minimum, the government will get an estimated Rs. 18,200 crore this fiscal, much higher than budget estimate of Rs. 11,300 crore, according to Telecom Secretary M F Farooqui.

• Idea Cellular bagged the circles of Andhra Pradesh, Delhi, Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Mumbai, North East, Punjab.

Telecom Minister's Views

• Telecom Minister Kapil Sibal said, "We will see a smile on Finance Minister Mr Chidambaram's face." Mr Chidambaram faces a challenge to meet the budget deficit target for the current fiscal year ending in March amid a shortfall in tax collections and revenue receipts from divestment of stake in state companies; he will welcome the higher-than-expected revenues from the spectrum auction.

176 - Nishant M.B177 - Shreerang C178 - Soniya K179 - Anjali K180 - Sanjeevani B