FE Editorial : Dialling a poor response

Budget's R40,000 cr target set to take a big hit

Though the 2G auction is still three weeks away, the initial signs—the number of companies who've said they wish to bid and for how many circles—don't look too good, with the number of bidders below the number of spectrum slots on offer. Which means the government could fall well short of its R40,000 crore target for the year from spectrum charges, both in the 2G auction as well as for the 'extra' spectrum that telcos hold. Given the poor financial condition the industry is in, the number of bidders was expected to be low, but not this low. Bharti Airtel says it will bid in just 5 circles, Vodafone in 17 and Idea in 22—the Tatas are bidding in just 3 and RCom is not bidding at all. With the exception of Uninor and Videocon, none of the Raja licensees are bidding, underscoring the fact they were only there to make a quick buck by flipping over their licenses. And, in addition, Reliance Industries has chosen to stay out—though this may not mean anything since it can always buy out an existing firm or one of the new bidders.

What does all of this add up to? It's difficult to make predictions without knowing the exact circles telcos are going to bid for, but some broad points can be made. For CDMA spectrum, as compared to the 22 circles for which spectrum is available, Videocon has bid for 10 circles and Tatas for 3 (Tata Tele will bid for what's called top-up spectrum, while Videocon will bid for more slots per circle since it is starting a new service). This implies a theoretical maximum of R9,000 crore of bids—if neither plans to bid for Delhi or Mumbai, as reports suggest, you can safely chop this by 30-40%. In the case of GSM, Videocon could theoretically bid up to R10,800 crore since it is interested in 17 of 22 telecom circles, though this could fall dramatically if it is not bidding for either Delhi or Mumbai. Between Bharti Airtel, Vodafone and Idea, they're interested in 44 circles or 2 pan-Indian licenses, but since incumbents can only bid for top-up spectrum, this effectively reduces their maximum bid to 1 pan-Indian license or R14,000 crore—since no one is interested in Delhi or Mumbai as they have enough spectrum here, R7,000 crore could be a realistic bid from them.

... contd.

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