2G: Excess demand for Bihar circle drives auction

New Delhi:  The 13th round of the 2G auction is currently underway and excess demand for the Bihar circle seems to be driving it. Bihar was the only circle which saw interest from the bidders on Monday, with the provisional winning price increasing by over Rs 1.7 crore over the reserve price. All other circles have seen muted response.
Here are the top 10 developments:
  1. Proceedings began on Wednesday with the start of the eighth round at 9 a.m.
  2. On Tuesday, a day after the 2G auction kicked off, shares of Bharti Airtel, which is one of the five telecom firms in the fray to pick up the licences, surged by more than 1 per cent to close at Rs 282.65 on the Bombay Stock Exchange in Mahurat trading.
  3. At the end of the seven rounds of bidding on Monday, the provisional winning price in 17 of the 22 circles up for auction was the same as the base price set by the government (Rs 14,000 crore). The only exception was in Bihar, where the provisional winning price increased by Rs 1.7 crore over the reserve price. Delhi and Mumbai—two of the most expensive circles—saw no bidders.
  4. The government had at the end of Monday’s proceedings received bids worth Rs 9,224.75 crore, which is less than 25 per cent of the Rs 40,000 target. This target was pared to Rs 20,000 crore after factoring in the poor response the auction was likely to receive and the cancellation of the CDMA auction after both bidders pulled out.
  5. On Day 1, there were no bidders for Delhi, Mumbai, Rajasthan and Karnataka circles. Only one block was bid for in Uttar Pradesh (East), no block was bid for in Gujarat; all eight blocks were bid for in Bihar; seven in Assam; six each in West Bengal, Haryana, Orissa, J&K, Madhya Pradesh and North-East, five each in Maharashtra; four each in Andhra Pradesh, Kolkata and Tamil Nadu; and one each in Himachal Pradesh, Kerala and Punjab. "Fifty-five to 60 per cent of what had been put up for auction has been bid for," Telecom Secretary Chandrashekhar said at the end of the bidding in Day One on Monday. Circles that did not find any bidders include Rajasthan and Karnataka.
  6. Telcos will most likely get another chance to bid for circles that remain unsold, though the government is yet to take a decision. Till it does, no bidders in a circle will mean only the existing players will keep operating in that circle. No company has applied for a pan-India licence.
  7. The muted response to the 2G auction is in contrast to the sale of 3G airwaves that the government held in 2010, which lasted more than a month. The government had raked in more than $12 billion (Rs 66,000 crore) from that auction.
  8. The reason for the poor response, the industry says, is the government's base price at Rs. 14,000 crore, which is seven times what companies paid in the 2008 auction. Second-generation mobile spectrum is being reallocated through an auction on the Supreme Court's order that also cancelled all 122 licences granted to eight carriers by then Telecom Minister A Raja, the main accused in the 2G scam, in 2008.
  9. The industry has also attributed the tepid response to the government's decision not to auction the entire spectrum made available after the cancellation of the 122 licences. Earlier this month, the Supreme Court pulled up the Union government and asked it to explain why it was not auctioning the entire spectrum that was made available after the cancellation of licences.
  10. New players and telecom companies affected by the Supreme Court verdict will have to win at least four blocks to start or continue their operations. This means that Idea Cellular, Videocon and Telenor will have to win at least 5 MHz of spectrum, divided in blocks of 1.25 MHz each, to continue their services in areas where their licences were cancelled. However, existing players whose licences were not affected by the Supreme Court order, can bid for two blocks. These players are Airtel, Vodafone, and Idea Cellular. Only five operators — Bharti Airtel, Vodafone, Idea Cellular, Telenor and Videocon — are in the fray for the auction. The Telecom Ministry had planned to hold two separate auctions for airwaves used by GSM and CDMA (Code Division Multiple Access) - based mobile phone carriers. However, with Tata Teleservices and Videocon pulling out of the CDMA auction last week, there are no bidders for the same.


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