3G auction process
3G auction process
3G auction process
1. Back ground of 3G auction
Spectrum is a very scarce resource. During the early years, the spectrum was allocated along with the issue of mobile licence. In 2002, the Government introduced a subscriber linked spectrum allocation. However due to the deluge of over 570 UAS applications in Dec 2007, DoT delinked the spectrum from telecom licence and implemented a policy of first come first served basis. In 2008, DoT revised the criteria for additional spectrum allocation according to which the subscriber base required was hiked to 2 to 6 times. The spectrum fee collected was continued at the 2001 rates.
As the Government came under criticism for its 2G spectrum allocation policy, it decided to adopt a new open and transparent process of spectrum allocation for 3G and BWA. The result was very surprising to the industry and Government as the Government ended in collecting Rs 67719 cr (US $ 15.04 billion) for both 3G spectrum. The auction took 34 days and 183 rounds of bidding. Delhi and Mumbai contributed to 39% of the total money collected. Top circles like Delhi, Mumbai, Tamil Nadu, Andhra and Karnataka accounted for 66% of the total bid value.
This new process of electronic auction is now hailed as a trend setter and the Government is seriously thinking of extending this auction process to other infrastructure projects as well.
2. Scope of 3G auction
The 3G auction was conducted for 4 slots of 5 MHz in Punjab, Jammu & Kashmir, West Bengal, Bihar and Orissa and 3 slots in the balance 17 circles. In the case of BWA there are 2 slots of 20 MHz in all 22 circles. As this is over and above the slot allotted to BSNL and MTNL, India will have at least four 3G players and two broadband operators in each circle.
The merger and acquisition rules were kept tight to ensure that there is competition. If any two 3G players merge their business they are allowed to keep only one slot. The winners of the spectrum are expected to roll out the network to cover 50% of each district in the next 5 years.
3. Objective of 3G auction
The primary objectives of the auction are to award spectrum to the telecom firms transparently while promoting efficient use of the spectrum, stimulate competition, and generate revenue for the government.
4. 3G Auction rules and process
The rules of the 3G auction were issued by the department of telecom in its notice inviting application (NIA) issued on 25 February 2010. The auction started on 9 April 2010. As per this NIA,
Auction on Internet - The electronic auctioning system (EAS) was conducted on a secure, bidder-specific website. Each of the auctions for 3G spectrum in 22 telecom circles was a separate but simultaneous process conducted over the Internet.
Access - Bidders were given user ids and passwords to access the electronic auction from computers at their offices. This facilitated the participation by the top honchos on the auction process from their board rooms.
Timings The auction will start from 9am and go on till 7.30pm every day for six days a week till it is complete.
Number of rounds There will be multiple-rounds of auction with time limits. Each round will be for a fixed time period. Maximum extra time permitted is four hours, broken up into 10-minute chunks for extensions. The names of bidders for each service area would not be disclosed during the auction, only the total number of applicants would be known.
Reserve Price - There will be a reserve price for each circle and auction starts at the reserve price. The reserve prices are Category A -320 cr; Category B -120 cr; Category C - 30 cr. The reserve prices are half of 3G prices for BWA.
Eligibility Points Bidders are required to pay earnest money to obtain Eligibility points (EP). Each Metro and Category A circle needs 32 points, Category B circle 12 points and Category C circle 4 points, totaling 350 EPs. The earnest money deposit will determine eligibility to bid in the first round.
Bidding - The bid value in each round will be determined by the auctioneer based on demand. The price increase will be 10% if there are 6 bidders and 3 slots. The increment will be 5% if there are only 5 operators. The bid increment will be 1% when the number of bidders come down to 4 per circle. The increment is capped at Rs 40 cr (20 cr for BWA) in each round. All circles will remain in play till the end. The auction starts at 80% level of eligibility points, The Activity Ratio is increased by the Auctioneer to 90% at a later stage and then to 100%.
Announcement of results - At the end of the auction, bidders will be notified of the provisional outcome. During each round, the Auctioneer declares a number of Provisional Winners. The provisional winner is eligible to bid for the next round. The auctions end when demand is equal to the number of slots available in each servi
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