9th round of 2G auction begins after poor response on first day

9th round of 2G auction begins after poor response on first day
New Delhi:

The auction of 2G spectrum entered its second day today even as the first day saw subdued response.

The ninth round of the auction is currently under way, and could very well be the last round of the auction, sources informed NDTV.

Seven rounds of the auction were held on Monday, when the auction began, and saw the government mop up Rs. 9,224.75 crore from the bids, which is less than 25 per cent of the Rs 40,000 target.

If things don't change drastically, the government is not expected to mop up more than Rs 10,000 crore from this auction, which includes the one-time fee.

At the end of the seven rounds of bidding on Monday, the first day of the auction, 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. The auction continues today after a one-day Diwali break.

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.

After seven rounds on day one, two key circles—Delhi and Mumbai—also the most expensive, had not received any bids. There were no bids for the Rajasthan and Karnataka circles either. Telcos have said that the government's base price of Rs 14,000 crore for 5 MHz of GSM airwaves in all the 22 telecom zones is too high—it is more than seven times what companies paid in the 2008 grant process. No company has applied for an all-India licence in the 2G auction. They are bidding in areas where they are already strong.

Second-generation mobile spectrum is being reallocated through an auction in accordance with the Supreme Court's February order that cancelled all 122 licences granted to eight carriers by then Telecom Minister A Raja, the main accused in the 2G scam.

At the end of auction on the first day, bids had been received for 98 blocks across 18 circles of the total 176 blocks in 22 circles that were up for grabs. Of those bid for on Monday, only one was from Uttar Pradesh (East), none from Gujarat; all eight blocks from Bihar; seven from Assam; six each from West Bengal, Haryana, Orissa, J&K, Madhya Pradesh and North-East, five each from Maharashtra; four each from Andhra Pradesh, Kolkata and Tamil Nadu; and one each from Himachal Pradesh, Kerala and Punjab.

The telcos will get another chance to bid for circles that remain unsold after the initial rounds of bidding.

The government is yet to decide on what will be done in circles that remain unsold after the auction ends.

Till it does, no bidders in a circle will mean only the existing players will keep operating in that circle. The auction has no set timeframe and is due to run for as long as it takes for bids to dry up.

Bidding for each circle is happening separately. Many circles have so far seen fewer bidders than the number of blocks up for grabs, sources said, which means an auction is not possible for those circles.

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. India raised more than $12 billion (Rs 66,000 crore) from that auction.

Five operators—Bharti Airtel, Vodafone, Idea Cellular, Telenor and Videocon—are bidding for GSM (Global System for Mobiles) airwaves. 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 auction last week, there are no bidders for CDMA spectrum. Videocon will continue to bid for GSM spectrum.

Norwegian telecommunications group Telenor needs to win spectrum in the auction to continue operations in India, the world's second-biggest mobile phone market, as it is set to lose all its permits.

Idea Cellular, set to lose seven of its licences, has to win them back to retain its pan-India presence.

New players and telecom companies affected by the verdict will have to win at least 4 blocks to start or continue their operations. So, 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.

Existing players whose licences were not affected by the Supreme Court order can bid for only two blocks—Airtel, Vodafone, and partially Idea Cellular. Bharti Airtel and Vodafone are participating in the auction to buy additional airwaves frequencies and can bid for maximum of two blocks in a telecom area.

The country is divided into 22 telecom circles, with each circle roughly equal to a state. Exceptions include Mumbai and Maharashtra, which are considered separate circles. Also, all north-east states are clubbed into one circle. The auction that began today is being held for all 22 circles for the 1,800 megahertz spectrum band. The 22 circles in which India has been divided are West Bengal, Andhra Pradesh, Assam, Bihar, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala, Madhya Pradesh, Maharashtra, North East, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh (West), Uttar Pradesh (East), Delhi, Kolkata and Mumbai.

In each zone or circle, the government is auctioning spectrum in 11 blocks, with each block equal to 1.25 Mhz of airwaves; the exception are Delhi and Mumbai, where there are only 8 blocks. Of the 11 blocks in each circle, three blocks are reserved for new telecom players or operators whose 122 licences were quashed by the Supreme Court on February 2 this year in the 2G spectrum allocation scam case.

In February, the permits that the Supreme Court cancelled included Uninor's 22 licences, Loop Telecom (21), Sistema Shyam (21), Idea Cellular including Spice Communications (13), Videocon (21), Etisalat DB formerly Swan Telecom (15), S-Tel (six) and Tata Teleservices (three CDMA licences).

Last week, the Supreme Court pulled up the government for not following its February 2 order of auctioning the entire 2G spectrum made available after cancellation of 122 licences. "Prima facie we find you (Centre) aren't carrying out the (February 2) order but playing with it," the court had said.

The government has to file an affidavit by November 19 on why it is not implementing the Supreme Court's 2G order in full.

With inputs from agencies