Jan. 18--NEW DELHI -- The government has received as much as Rs11,567 crore in earnest money, a deposit paid to demonstrate commitment to a transaction, from the eight telecom services providers that will participate in a February auction of radio waves, two senior department of telecommunications (DoT) officials said.
Bharti Airtel Ltd, India's largest communications service provider, has submitted Rs3,700 crore as earnest money, the highest amongst all the participants, followed by Vodafone India Ltd at Rs2,800 crore and Mukesh Ambani-controlled Reliance Jio Infocomm Ltd at Rs2,600 crore. Idea Cellular Ltd submitted the lowest earnest money deposit of Rs1,567 crore, among the major telcos.
This indicates that the operators intend to bid for large amounts of the available spectrum, including all the 45Mhz of 900Mhz spectrum being sold in the lucrative metro telecom markets of Delhi, Mumbai and Kolkata.
Potential bidders in the auction need to deposit earnest money in the form of bank guarantees along with their applications for participation in the spectrum sale. The amount of money depends on the number of circles, or licence areas, and slots that the operators plan to bid for and earns them points at the start of the auction. A telco has to submit the earnest money for a specific circle to be able to bid for the spectrum available in that particular area. Different circles have different earnest money requirements.
The remaining four telcos submitted earnest money of less than Rs330 crore, indicating that they only plan to bid for additional incremental 2G spectrum in the 1800MHz band, of which as much as 403Mhz is available across the country. This means that the 1800MHz band is unlikely to see aggressive bidding of the kind for the 900MHz band.
Tata Teleservices Ltd submitted bank guarantees of Rs 267 crore, Reliance Communications Ltd, or R-Com, submitted guarantees worth Rs200 crore, Aircel Ltd submitted Rs100 crore in bank guarantees and Telewings Communications Pvt. Ltd that runs the Uninor brand of telecom services submitted Rs330 crore of guarantees.
"The figures clearly indicate that Vodafone, Reliance Jio and Bharti will be going big on 900 MHz in Delhi and Mumbai, while Idea is likely to bid for 900 MHz in Mumbai where it does not have 3G either," said a senior regulatory executive with one of potential bidders, requesting anonymity. "R-Com and Tata will be likely bidding for small chunks of spectrum to fill in the gaps in their existing networks," he said.
Bharti and Vodafone will see their 900 MHz spectrum in the lucrative Delhi and Mumbai markets expire in November. This spectrum in the 900 MHz band is considered more efficient than other bands because it requires fewer towers and network boosters that incur additional costs.
"The auctions are likely to be very interesting as one new entrant joined the bidding. The operators whose licenses are expiring in the near future are likely to bid to continue providing services and others would bid to augment capacity. In our view, the aggressiveness or otherwise would be proportional to clarity government brings on various contentious regulatory issues like spectrum usage charge, intra-circle roaming, mergers and acquisitions, re-farming etc," said Hemant Joshi, a partner, Deloitte Haskins and Sells.
The telecom commission is likely to finalize a decision on the spectrum usage charge in its next meeting on 27 January, the same day as the last date for withdrawal of applications by potential bidders.
"Our base case view remains that 1800 MHz auction will see limited participation and close at the reserve price given higher supply than demand and telcos are looking to conserve cash for better spectrum like 900Mhz or 700 MHz," a 16 January report on the auctions by Sachin Salgaonkar, an analyst with Goldman Sachs (India) Securities Pvt. Ltd, said. "As we find the 900 MHz reserve price high to justify the business case for a new telco, we believe incumbents that currently own this spectrum (like Bharti) will require this spectrum at the reserve (or slightly higher) price."