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Spectrum Auction: Close To Finding Its Level

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On the ninth day of bidding in the telecom auctions, despite seven rounds of bidding, the activity has dipped considerably. There was a price escalation in only four circles — Assam, Madhya Pradesh, Maharashtra and Mumbai — as opposed to six circles over the past few days. The total increase at Rs 6.44 crore per block of 200KHz is the lowest since the auctions opened on 3 February. Mumbai rose by Rs 4.07 crore accounting for 63 per cent of the price increase today. Assam and Madhya Pradesh are the only circles with excess demand.

There are many clear indications that the bidding seems to be entering the penultimate phase. First, the total earnings for the government at the end of the day was Rs 60,569 crore ($ 9.8 billion). That’s an increase of a mere Rs 597 crore over yesterday’s level. The 900MHz band stays at yesterday’s level of Rs 23,590 crore while the 1800MHz will bring in Rs 36,979 crore.

Two, there has been no activity in the 900MHz band for some time now. There has been no escalation in the price of Mumbai for the past six days, Kolkata (4 days) and Delhi (2 days). In the 1800MHz band, 11 of the 22 circles have seen no escalation in the nine days of bidding.

Spectrum Auction: Read The Stories So Far
                     
Third, an interesting facet emerges while comparing the prices of Mumbai and Delhi in the two bands. Mumbai’s price in the 1800MHz band at the close of bidding today at Rs 54.4 crore is 74.7 per cent of Delhi’s Rs 72.8 crore. Similarly, in the 900MHz band, Mumbai’s Rs 563.09 crore is 76 per cent of Delhi’s Rs 740.96 crore. Similarly, at the current level 1MHz of 1800MHz band spectrum in Delhi is priced at Rs 374 crore, while in Mumbai it works out to Rs 272 crore. Both these prices are 49 per cent of the price of 900MHz spectrum in the circles. Considering that the capital expenditure for an 1800MHz network is estimated to be 1.8 times that of 900MHz, it looks as if the auction is close to finding its level.

Unless any drastic changes happen, the auction could be heading for a close by the end of the week.

anupjayaram@gmail.com