The e-auction for 3G spectrum, which started on Friday, has seen bids go up by 24% over the reserve bid prices in just three days. There is no time limit or deadline for the closing of the auction
The third generation or 3G auction is increasingly becoming intense. In just three days since the auction commenced, bids for all-India 3G spectrum have already gone up by as much as 24% above the reserve bid prices. The auction is expected to last for two weeks; however, there is no time limit or deadline for the closing of the auction.
At the end of the third day of bidding—that saw a total of 16 rounds—the bidding price was quoted at Rs4,324 crore, up 24% from the base or reserve price of Rs3,500 crore. Moreover, this is just the beginning of the intense rounds of the battle for spectrum.
The Indian government has set itself a target of Rs35,000 crore by selling 3G spectrum and wireless and broadband access (BWA) services. With the bid price touching Rs4,324 crore, the government can get a minimum of Rs17,636 crore by the auction of 3G spectrum, not counting the amount which the government can collect through BWA allocations.
"We believe that only three slots in key circles like Delhi, Mumbai, Maharashtra, Gujarat and the southern states would lead to very aggressive bidding with at least five-six operators (Bharti, Vodafone, RCom, Tata Teleservices, Idea and Aircel) eagerly waiting to pounce on the opportunity. In addition, there are concerns on a viable business case for 3G services given aggressive tariff cuts by MTNL like 1paise/sec for both voice and video calls," said IDFC-SSKI Securities Ltd in a research note.
3G mobile services will allow high-speed content download and broadband services. The successful bidders would be allowed to offer 3G services on a commercial basis from 1 September 2010.
Coming back to the auction, the interesting takeaway from the three days of auction is that Mumbai, the topmost circle in the country in terms of average revenue per user (ARPU), is lagging behind circles like Delhi and Gujarat. Among all the metros, there was a bid of Rs416.43 crore for Delhi. Similarly, in the State-wise circle, Gujarat saw a bid of Rs416.42 crore.
According to a PTI report, Andhra Pradesh, Tamil Nadu and Maharashtra saw bids rising to Rs404.54 crore, while that for Karnataka was Rs396.58 crore ahead of Mumbai at Rs392.66 crore. The bid for Rajasthan was Rs159.47 crore, UP (East) was Rs157.66 crore, Kolkata & Kerala (Rs150.16 crore each), Madhya Pradesh (Rs149.02 crore), Haryana (Rs140.09 crore) and Punjab (Rs123.63 crore).
There were negative demands in nine circles—West Bengal, HP, Bihar, Orissa, Assam, the North East, J&K and Haryana. Excess demands were seen for eight circles with the maximum being for UP (East). These circles did not see any increase in their bid prices since Friday, the PTI report added.
For incumbent operators, winning a 3G spectrum is a do-or-die situation, because a failure would lead to higher churn of subscribers and also put them at a disadvantage against competing operators.
“Given the supply-demand mismatch (for three 3G spectrum slots) and its importance from a long-term growth perspective, we expect significant overbidding to take place. We expect the auction amount to reach Rs80,000 crore compared with the base price of Rs35,000 crore at a pan-India level," said Ambit Capital Pvt Ltd, in a research report.
Both 3G auction and mobile number portability (MNP) are going to affect incumbent as well as new mobile service providers in a big way. MNP allows subscribers to retain their existing mobile telephone number when they move from one access provider to another, irrespective of the mobile technology, or from one cellular mobile technology to another of the same access provider, in a licensed service area.
While MNP would lead to higher churning across subscribers, 3G may help operators to arrest this. The auction of spectrum has been postponed several times as there was indecisiveness over the availability of spectrum and the number of operators to be allowed in each circle.
The Department of Telecom (DoT) was at loggerheads with the defence ministry over the latter's reluctance to vacate the designated spectrum (airwaves) for commercial use.
Similarly, the implementation of MNP has been postponed many times. Earlier, the Telecom Regulatory Authority of India (TRAI) had fixed 31 December 2009 as the target date for implementing MNP in ‘Metro’ and ‘A’ category circles and 20 March 2010 for ‘B’ and ‘C’ category circles. However, it has been postponed again and now MNP is expected to be rolled out by end-June 2010.
Ambit Capital said, “We believe MNP would impact mainly post-paid subscribers where churn has been at lower levels and where ARPU is higher. Telecom companies who manage to get 3G spectrum would be less susceptible to the MNP impact, in our view. We, however, believe that MNP could pressure financials, as operators would need to spend more on quality of service and selling and marketing to attract new subscribers as well as retain existing ones."
Earlier, Moneylife had reported that delay in 3G auction was the main reason behind the postponement of MNP. (See here). Looking at the way the auction for 3G and BWA and implementation of MNP is moving, one can only hope that by the end of this year, these facilities would be accessible for all subscribers across the country.