3G auction ends,windfall for Govt in fierce bidding

Given that only scarce spectrum was available under auction in this round,companies have bid fiercely,yielding the government substantially higher revenues against the original estimate of Rs 30,000 crore to Rs 35,000 crore. Bharti Airtel,which emerged winner in 13 circles paying Rs 12,295.46 crore,could not help point out that “the auction format and severe spectrum shortage along with ensuing policy uncertainty,drove the prices beyond reasonable levels”.

Not surprising then that none of the nine participants in the auction won 3G spectrum for all 22 circles that were put up for bids. In a statement,Bharti said that though it will have a presence in key metros and Category A circles,it could not achieve its objective of a pan-India 3G footprint.

Vodafone Essar will pay Rs 11,617.86 crore for nine circles and Reliance Rs 8,585.07 crore for 13 circles.

As a percentage of GDP,revenues from the 3G spectrum auction alone will help the government wipe off 0.97 per cent of the fiscal deficit in 2010-11. India’s Chief Statistician Pronab Sen said the government may have to borrow about Rs 30,000 crore less this year to bridge its deficit.

But for telecom companies,it is going to get tougher. Their first task will be to tie up funds over the next six months to pay for the spectrum and put in place additional telecom infrastructure to offer 3G services. Then,given the price-sensitive Indian consumer,it will be war in the marketplace with companies trying to undercut competition,delaying their own break-even.

The 3G auction will be followed by an auction for wireless broadband spectrum. Eleven firms are vying for two national licences for private operators,with one slot reserved for state telecom firms.