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| Mock auction for 3G kicks off; hints at long-drawn process |
| BS Reporter / New Delhi Apr 06, 2010, 01:39 IST |
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The first ever auction of spectrum, which was kicked off today with a mock e-auction for 3G services, is expected to earn revenue of Rs 35,000-45,000 crore, according to top officials in the Department of Telecommunications (DoT).
However, the auction, as most companies realised today, would be a long-drawn one lasting at least one-two weeks.
Under the system, the auction prices would be increased to 10 per cent from 1 per cent after each round. For instance, if the number of bidders is one more than the number of spectrum slots, the increase would be 5 per cent. If there are two more bidders than the number of slots, it would be raised by 10 per cent. However, if the number of bidders is the same as the number of slots, the price would go up by only 1 per cent.
Considering the fact that many of the telcos are expecting that the final bid price for many of the circles would be virtually three times that of the base price, this would simply mean many rounds of bidding.
Telcos say each round would be of one hour and in the initial stages there would be six-eight rounds in a day. Once the players are comfortable, it would have 10-15 rounds of bidding in a day.
The auction would also happen concurrently in all circles and stop only when the highest bids have been discovered in all 21 circles. Companies have been given a special password to enter the bidding process.
Executives involved with the process say companies can withdraw from a bid, but return (of course, at a higher bid price) if they want to, provided they have enough points. Telcos have been given points based on the amount of earnest money that they had already deposited with the government for the auction. Obviously, those going for a pan-India licence have given more earnest money and, therefore, will have more points and flexibility to bid for various circles.
“We are expecting an amount of at least Rs 35,000-45,000 crore from the auction. However, it will be difficult to put an exact number for revenues as we are visualising an aggressive bidding,” a senior ministry official said on condition of anonymity. The Union Budget earmarked Rs 35,000 crore from the auction.
To give a feel of the auction process, DoT conducted a mock auction for the final bidders. Designed by NM Rothschild and DotEcon, along with DoT, the auction was totally internet-based wherein bidders could login from anywhere.
Many telcos like Vodafone have appointed external consultants who are helping them in the auction process. A source in the company said: “We don’t want to take any chances as this is the first time that e-auction is being held in India.” He added that these auctions extended to hundreds of rounds in the US, so it might be the same in India. Vodafone’s team is being led by their director-strategy, who is spearheading the auction.
Other bidders have created a strategy group and have been undertaking simulated mock e-auctions in their offices. Said a senior executive of a leading telco: “We have set up a strategy team and have taken board clearance for an upper limit till which we can bid. The strategy team consists of CFO and other top people in the company.”
The base price for pan-India 3G auction is Rs 3,500 crore, while for BWA it is Rs 1,750 crore. In 17 circles, three 3G slots have been put up for auction, while in the other five circles, four slots would be auctioned. For BWA, two slots are available for auction.
“The mock auction went off well. Every bidder was able to login into the system and understand the auction process,” said a DoT official involved in the process. One of the operators complained that the IT system was a bit slow.
The final bidders for 3G include Bharti Airtel, Reliance Communications, Idea Cellular, Aircel, STel, Tata Teleservices, Videocon, Etisalat DB and Vodafone Essar. For BWA, Aircel, Augere, Bharti Airtel, Idea Cellular, Infotel Broadband, Qualcomm, Reliance WiMax, Spice Internet, Tata Communications, Tikona and Vodafone Essar are in the fray.
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