Wrong auction format drove 3G spectrum bid high: Sunil Mittal

Voice - 3G

By: PTI Staff| PTI | New Delhi, July 13, 2010

With no operator getting pan-India footprint for 3G because of high bid for spectrum, telecom czar Sunil Mittal today slammed the auction design, saying it created an artificial scarcity.
The government has earned over Rs 67,700 crore from the sale of 3G spectrum with pan-India bid touching Rs 16,750 crore. Bharti paid Rs 12.295.46 crore, the most among operators, for 3G spectrum in 13 circles, including Delhi and Mumbai.
The pan-India reserve price for 3G spectrum was Rs 3,500 crore.
To a question on operators initially welcoming the auction process, but later opposing it after bid prices touched sky high, Mittal said "we welcomed the auction process for giving spectrum out. The auction design we never welcomed.
"The auction design, given that the auction will close when all 22 circles close, to my mind lends itself to mischief by some of the non-serious players," he said.
Global consultants NM Rothschild was the lead auctioneer, contracted by the Department of Telecom (DoT).
After the end of the 34-day long auction process for 3G spectrum, Bharti had said "we would like to point out that the auction format and severe spectrum shortage, along with ensuing policy uncertainty, drove the prices beyond reasonable levels.
The government had estimated Rs 35,000 crore revenues from the sale of 3G and Broadband Wireless Access (BWA) spectrum but it got over Rs 1,06,262 crore, an amount that would bring down the fiscal deficit of the Centre by about one percentage point.
Mittal has already said that 3G service will not come cheap, especially for the subscribers in the metro cities like Dand Mumbai, where the 3G spectrum bid was the highest at Rs 3,316.93 crore and Rs 3,247 crore respectively against the reserve price of Rs 420 crore each.
As per the auction format, the bidding remained open till the demand and supply became equal in all the circles.
This created a situation of an artificial scarcity and drove the prices beyond reasonable levels, Mittal said, adding this would determine the tariffs for 3G mobile services offering high-speed broadband.
Similarly in case of BWA spectrum auction the all-India bid touched Rs 12,847.77 crore vis-a-vis reserve prices of only Rs 1,750 crore.
In the BWA auction, only Infotel Broadband, which was later acquired by Mukesh Ambani-led RIL, bagged the pan-India spectrum while other leading players like Airtel could manage to get the radio airwaves only in four circles.
In fact Anil Ambani group firm RCom and Vodaofne exited from the auction citing high bid prices.