Editorial: Irrational exuberance

Feb 05 2014, 04:31 IST
Comments 0
SummaryBidding wars could prove costly, as in 2010

Given the government was just looking at earning a little over R11,000 crore from the current round of auctions, it has got a very good response and can easily look at mopping up R5,000-7,000 crore more, assuming that bidders choose to pay the minimum third up front—if cash-rich firms choose to pay more upfront, the budget’s bounty will be that much more. Of the R40,487 crore the government had budgeted for, around half was to come by way of the annual license fees and spectrum usage charges. Another R11,500 crore has already been got in the previous two auctions so far this fiscal. Measured against what A Raja got for the spectrum he sold in 2008, the auction is already a success, though the real success will depend on how much of the spectrum on auction gets picked up and how much remains unsold. Though it is early days yet, the second day got over R44,635 crore of bids as compared to much lower amounts in even the 3G auction—that auction, to get a sense of how long the auctions can last, dragged on for 34 days.

The initial data suggests that while the auction for 1800 MHz spectrum is proceeding at a sensible pace, the action has really hotted up in the 900 MHz space. Though it is not clear whether it is newcomer Reliance Jio that is bidding up prices here, it is clear from the amount of spectrum being bid for in Mumbai, that others are also trying to get spectrum here—that is, apart from the incumbents who are, in any case, trying to ensure that they get to keep the 8 MHz of spectrum that they have in this band. While the second day saw excess bids—over the reserve price— of nearly 70% in Mumbai, the action was hot in Delhi and Kolkata as well, with 47% extra bidding in both these circles. In other words, the government decision not to renew the holdings in this spectrum band has ensured aggressive bidding.

Though in a different setting, this is in a sense action replay of 2010. At that time, telcos bid aggressively for 3G spectrum as, apart from the potential of more data revenues, there was a fear that their high-paying 2G customers would desert them if they did not offer 3G services. Unless telcos are able to generate significantly higher revenues, including from data services, the impact

Single Page Format
Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...