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Spectrum auction begins: Reliance, 7 others in fray

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Eight mobile carriers are bidding for the spectrum auction that begun on Monday. This is the government's third attempt at auctioning two frequency bands (900 MHz and 1800 MHz) for at least Rs 11,300 crore or $1.8 billion.
Here are 10 things to know about the auction
  1. The auction has been necessitated following a Supreme Court order in 2G case directing that all the radio waves freed from the cancellation of 122 licences in February 2012 should be auctioned. Revenues from the new licensing are crucial to bridge the fiscal deficit, which in the first three quarters inched closer to the budgeted target for the whole year.
  2. The previous two attempts (November 2012 and March 2013) were boycotted by major mobile phone operators that complained minimum bid prices were too high. As a result, the government cut sharply the floor bid price for the February auction, helping it lure interest from eight carriers including the market leaders.
  3. For 900 MHz band, the base price is 53 per cent lower than the previous auction price. It is Rs 360 crore per MHz for Delhi, Rs 328 crore for Mumbai and Rs 125 crore for Kolkata. For the 1800 MHz band, the reserve price for a pan-India licence is at Rs 1,765 crore per MHz, about 26 per cent lower than in the March sale.
  4. The government has also slashed the annual fee on spectrum from 3-8 per cent of revenues to flat 5 per cent. The move will benefit incumbents such as Bharti Airtel and Vodafone, which currently pay around 6 per cent of their revenue in annual fees. The new rate is higher than the 3 per cent flat rate suggested by sector regulator TRAI.
  5. The surprise entry of Reliance Industries in the auction fray has raised the prospect of fierce bidding. The spectrum bands RIL has applied to bid for would enable the company to provide basic cellphone services, which account for more than 80 per cent of industry revenue in India.
  6. RIL, controlled by India's richest man Mukesh Ambani, sits on a cash pile of nearly $15 billion, which gives it an advantage at the spectrum auction over rivals like market leader Bharti Airtel, which had nearly $10 billion in debt as of end-September.
  7. Reliance also owns a nationwide licence for high-speed 4G mobile phone networks, which it won by outbidding rivals in 2010. However, the broadband service under its Reliance Jio Infocomm unit, has not been launched yet.
  8. It is necessary for Vodafone to get spectrum in Delhi, Mumbai and Kolkata; for Bharti Airtel in Delhi and Mumbai, and Loop Mobile in Mumbai for continuing operations because their licences are expiring in November 2014.
  9. Reliance Industries could use the 1,800 MHz band to offer cellphone services or a different kind of 4G network. With the 900 MHz spectrum, it could provide 2G as well as 3G mobile services. Reliance aims to buy spectrum in both bands as 900 MHz is not available beyond Delhi, Mumbai and Kolkata.
  10. Other bidders in the auction are Idea Cellular, Reliance Communications, Aircel, Tata Teleservices and Indian unit of Norway-based Telenor.

(With inputs from Reuters)


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