Earnest money crosses spectrum sale target

Ahead of February 3 auction, 8 telecom companies deposit Rs 11,500 crore

 

The government has already met the spectrum auction Budget target for 2013-14, though the bidding for the 900-MHz and 1800-MHz spectrum is scheduled to start only from February 3.

Eight telecom operators have deposited Rs 11,500 crore as earnest money in the form of bank guarantees to the government for the spectrum: The FY14 Budget target from spectrum sale was Rs 11,343 crore. The total revenue target from spectrum, including auction amounts, one-time spectrum charges and annual regular licence fees, was Rs 40,874 crore.

The companies would get back the deposits if they withdraw the applications on or before January 27.

Earnest money is deposited on the base price. The final auction price could be much higher, which means the government would, in all probability, get more.

The 1,800-MHz band would be auctioned for all 22 circles and the 900-MHz band for Delhi, Mumbai and Kolkata.

Bharti Airtel topped the earnest money list with Rs 3,700 crore. Vodafone had deposited Rs 2,800 crore and Reliance Jio, the new kid on the block, Rs 2,600 crore. The three account for 78 per cent of the earnest money collected. Another significant player was Idea Cellular, which had paid Rs 1,565 crore to take part in the auction.

Analyst studies show the auction of the 900-MHz band in Mumbai and Delhi circles are expected to see highest competition, with at least four bidders expected to fight for three slots of 5 MHz each. Idea Cellular too, analysts said, would bid for Mumbai as the company does not have spectrum in the 900-MHz band.

“Reliance Jio is likely to bid for the 900-MHz spectrum as the efficient band will ease their fourth-generation (4G) services, and this band, coupled with spectrum in the 1800-MHz band, will help them roll out 2G services,” said an analyst with Angel Broking.

Reliance Jio was expected to bid for the 900-MHz band in the three metro circles and the 1,800-MHz band across India, except Bihar, Uttar Pradesh (west) and Jammu & Kashmir. Bharti is expected to bid for pan-India 1,800-MHz band and for the 900-MHz band in three circles. Vodafone might look at acquiring spectrum across all circles in the 1,800-MHz band. Telewings, which has operations in six circles, could bid for 10 new circles but stay away from high-value teledensity circles such as Mumbai, Delhi, Karnataka and Tamil Nadu, said analysts. It has paid earnest money of Rs 330 crore.

Reliance Communications might only go for additional spectrum in circles where it does not have 5 MHz in the 1,800-MHz band.

The quantum of earnest money a operator has paid is based on the reserve price of spectrum in each circle. This gives an indication of the number of circles and the quantum of spectrum a company was likely to bid for. The earnest money would be adjusted against the bid amount. The government can retain the earnest money if a prospective bidder violates certain rules. The government would get about a third of the total bidding amount this financial year, if the companies pay in instalments.

A company would have to deposit Rs 438.75 crore if it wants to buy the minimum 5 MHz in the 900-MHz band in the three metro circles, according to the notice inviting applications of the Department of Telecommunications (DoT). For the 1,800-MHz band, a new player would have to give a minimum bank guarantee of Rs 1,918.75 crore for 5 MHz in all the 22 circles.