2G spectrum auction nets Rs. 61,162 crore: 10 things to know

NDTV Profit Desk

14 Feb 2014, 01:19 AM IST

At Rs 61,162 crore, the government's total revenue from the auction is much higher than its initial estimate of about Rs 41,000 crore. The licences won today will be valid for a period of 20 years. The companies need pay only a quarter to a third of the winning auction price upfront and the remainder through to 2026.
Eight companies, including Bharti Airtel, Vodafone, and Reliance Industries Ltd, had applied to bid in the auction of 900 megahertz and 1800 megahertz band airwaves. The 900 megahertz band was auctioned only in three cities - Delhi, Mumbai and Kolkata.
The stakes were especially high for Vodafone and Bharti which use 900 Mhz. They had to join the auction after the Supreme Court refused to extend their licences, which expire in November 2014. Idea too won spectrum in the 900 MHz band in Delhi. (Read more)
The Mukesh Ambani-backed Reliance Jio bagged 1800 MHz band in 14 circles out of the 22 on offer. This will help the company to not only offer data but also voice services in these regions. Reliance Jio had earlier won the rights to offer 4G broadband services across the country. (Read: Who won where)
In the 1800 MHz band, Airtel won in 15 circles, Vodafone in 10 and Idea in 11.
Bidding for the 900 MHz band in Delhi, Mumbai and Kolkata was very aggressive, with Vodafone and Bharti Airtel forced to protect their turf. In Delhi, the winning bid was Rs 741 crore as against the reserve price of Rs 360 crore; in Mumbai, the winning bid was Rs 563 crore, while the reserve price was Rs 328 crore, and in Kolkata, the winning bid was Rs 195 crore vs a reserve price of Rs 125 crore.
Bids for the 900 Mhz band run into higher sums as it is considered better quality spectrum which requires lower investment for telecom companies to set up infrastructure. In comparison, the 1800 Mhz band requires higher capital expenditure.
At a minimum, the government will get an estimated Rs 18,200 crore this fiscal, much higher than budget estimate of Rs 11,300 crore, according to Telecom Secretary M F Farooqui.
Telecom Minister Kapil Sibal said, "We will see a smile on Finance Minister Mr Chidambaram's face." Mr Chidambaram faces a challenge to meet the budget deficit target for the current fiscal year ending in March amid a shortfall in tax collections and revenue receipts from divestment of stake in state companies; he will welcome the higher-than-expected revenues from the spectrum auction.
2G spectrum had to be auctioned afresh after the Supreme Court ordered in 2012 the cancellation of 122 licences issued in 2008 by then Telecom Minister A Raja. The Supreme Court held that the process used by him to allot licences was "illegal" and ordered a new auction. Auctions in November 2012 and March 2013 flopped as most bidders stayed away from the sales, complaining that the floor bid prices were too high. The eight bidders applied to participate in the current auction after the government sharply cut auction reserve prices.

(All the data is based on provisional auction results released by the Department of Telecom)