Aggressive Bidding in Spectrum Auction Will Help Ease Fiscal Deficit

Friday, March 06, 2015
This is the largest sale of 2G and 3G airwaves so far in India (file photo: The Hindu)

The government’s latest auction of radio wave frequencies for telecoms networks got off to a strong start this week, with bids worth about Rs. 65,000 billion ($10.4 billion) so far. The government expects to raise Rs. 82,000 crore ($13.1 billion) in the auction, the proceeds of which will help ease the fiscal deficit.

Market leaders Bharti Airtel and Vodafone Group's local unit are among the eight companies bidding to win the 20-year allocations in four different spectrum bands. The premium 900 megahertz band, which is currently being used for voice services but can also carry high-speed 3G data, has received the strongest interest so far. It also has more reach than the higher-frequency, higher-capacity 1800 and 2100 MHz bands on offer.

The auction began on Wednesday and could take days or even weeks depending on bidding intensity, though the government will not release results of the auction because of a court ruling.

This is the fourth auction since 2010 and the largest sale of 2G and 3G airwaves so far in India. The government had raked in Rs 62,162 crore ($10 billion) from the last spectrum auction held in February 2014.

Most of the spectrum put up for auction this time is presently held by the country’s top four operators – Bharti Airtel (6 circles), Vodafone (7 circles), Idea Cellular (9 circles) and Reliance Telecom (7 circles). Their licences will expire in the next financial year starting April 1, so it is essential for these companies to bid for spectrum in these circles if they wish to continue offering mobile and other telecom services there.

With the companies locked in a do-or-die battle, bidding for the 900 MHz band was already up 45 per cent over the reserve price on day 2.

But Asian brokerage firm CLSA pointed out in a report that it was surprised the large data markets of Delhi, Mumbai, Karnataka and Andhra Pradesh saw no price increase in the 2100 MHz band, despite only one block of spectrum available.

Overall, 29 licences in 18 service areas will expire in 2015-16. These licences hold 184 MHz spectrum in the 900 MHz band and 34.2 MHz in 1,800 MHz band.

The government is hoping that the sale of telecom spectrum will help ease the country’s fiscal deficit, which it has pledged to keep within 4.1% of GDP in the current financial year.

- Karan Singh

To Learn More:

Spectrum auction: Second day bids grow to Rs 65,000 crore (PTI)

Centre mops up Rs 5,000 cr on Day 2 of spectrum auction (Financial Express)

Airwaves auction off to strong start, bids near $10 billion (by Aman Shah, Reuters)


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